Over the years, I’ve had friends, family & colleagues coming to me asking about appraisals. Usually, it’s to say that they just got one and the appraiser “clearly must have been smoking something”… A lot of folks are looking to take advantage of the low interest rates that are teasing them. If you haven’t refinanced your house in the last year (or even last 6 months), it might be time to check your current interest rate against market interest rates because they’ve dropped substantially over the last year. I personally have refinanced my home twice this year.
Phoenix/Scottsdale Metro area median sale price rose 147.9% from it’s bottom in May 2011. Because values still fluctuate from area to area, based on a number of variables, there are instances where appraisers struggle to properly assess market value. Your ability to get an appraisal right the first time can be the difference between getting a lower interest rate, a lower down payment, being able to purchase the home for which you’re under contract and/or possibly shelling out more money for another appraisal. Regardless of what it means to you, I’m sure you’d rather the property appraise for the value you expect (or more!) in the first place.
Every time a client or friend tells me they’re going to refinance a property, I immediately go into “list agent” mode- ready to defend my listing from the throws of an overly conservative bank looking to thwart my sales price. The only difference is that I don’t have that home listed. However, approaching an appraisal, particularly when the market is accelerating, I treat the process the same way. The advice I gave all my clients & friends can be summed up into 5 items:
1. Make a List of ALL Improvements to the home
Type a list that you can hand to the appraiser when they walk through the door. While many appraisers are trained and astute to assess the features of homes, many improvements are lost on them because 1. they do not have product knowledge or 2. because the improvements are just not visible (literally) to them. Every homeowner should take the time to stop and detail all of the things they’ve done to their home.
Most appraisers should actually ask you whether you have made any improvements and having a list handy makes it much easier for you to transfer that info to them that they can have as they are completing the report. You having to rattle off every little detail puts the homeowner on the spot and tests his/her memory as well as tests the appraiser’s short hand ability. You don’t want to rely on either. A typed (or legible) sheet is ideal, but a hand-written list will do, as long as it is easy to read.
Make sure to include things behind the walls like added insulation, 2×6 construction, cat-6 or HDMI wiring, smart home systems or components, enhanced security features, hot water heaters, heating & cooling systems roof items or improvements in places that the appraiser will not be able to see without a ladder or some other construction equipment to verify it. Name dates and prices, if you can, for these improvements. You may go and spend a sizable amount of money on a feature that your appraiser may not recognize the quality and ultimately give you full value for.
2. Have your REALTOR run “comps” on your home
When I say have a REALTOR® run comps, I’m not saying run to Zillow.com and look to see what the house down the street sold for. Zillow is no substitution for careful thought and calculation when analyzing market data. Your local MLS will have specific information like whether or not there were concession in the sale (contributions from seller to buyer to complete the purchase), what kind of financing (or cash) was used, pictures of the interior and usually a pretty good representation of the condition of the home. If there’s any question about the condition, a REALTOR® can pick up the phone and call either the seller’s or buyer’s agent for verification of details. Zillow (or Trulia or any other website) can’t do that for you.
“Good” comps will usually not vary more than a few hundred square feet from the size of your home, the condition should be comparable across the board (as much as possible), the lot sizes should be the same and the best comps are usually no more than 3-4 months old, but sometimes comps up to 1 year may factor in. There are always exceptions. Homes with very few comparables, i.e. homes with intangible features including: views, high-end or custom features, or homes that are the oddball (a 900SF home in a neighborhood where the average is 1700+SF; It’s happened to me!) are treated differently and the ranges may be wider in these instances, but it’s up to the professional doing the work to use good judgment to extrapolate.
Your agent will also be able to point out where certain boundaries lie that drastically affect the value of the home. For instance, on the border of Phoenix, Scottsdale & Paradise Valley, near the intersection of Tatum & Shea, going north of Shea from 40th St to about Scottsdale Rd, may result in a value of $25K-50K, just for the change from the Cherokee Elementary school district to the Sequoya Elementary school district, though both areas fall within Scottsdale Unified.
Likewise, in Arcadia proper, homes on the north side of the street from Indian School north to Camelback Rd. will have higher values due to the awesome views of Camelback Mountain. If you’re west of Camelback Mountain and in Paradise Valley, the “right side” of the street may be the east side of the street to again capture those awesome red rock views at sunset. By the way, this is a complementary service I offer to all of my clients.
3. Pre-interview the Appraiser
When your loan officer asks for your credit card or other payment arrangement to order your appraisal, that’s a pretty good time for you to ask about the appraiser being used to make sure that this person isn’t some newbie, fresh out of appraisal apprentice-ship that may not be able to discern your custom kitchen with the birdseye maple woodwork or the appraiser coming from Queen Creek to appraise your home in N. Scottsdale.
If your loan officer says, “I don’t really know too much about this appraiser” or “he’s new to our approved list”, ask for someone else. You don’t really want any wild cards when you’re paying your hard-earned money to purchase or refinance your home. Appraisals in Phoenix/Scottsdale typically run anywhere from about $350-600, unless your home is large or has many custom features, in which case, that amount could increase.
**BEFORE THE APPRAISER SETS THE APPOINTMENT** Ideally, your appraiser should have some knowledge and applicable experience working in the area immediately surrounding your home. Areas with a large number of older homes, more custom features (views, horse properties, custom/luxury homes) need appraisers familiar with them. Trust me, you don’t want appraiser who primarily works in Buckeye appraising your estate in Paradise Valley or DC Ranch. A SubZero built in fridge is NOT the same as a Frigidaire Gallery series.
Go ahead and ask them a few questions about their knowledge of the area and how many appraisals they’ve done there recently. Ask if they’re familiar with the schools nearby- public school boundaries have a surprisingly large impact on home values. Ask a resident of McCormick Ranch whether the home values change much east or west of Hayden and north or south of Via De Ventura. They’ll know…
You might even go a step further and try to run the name of your appraiser by your REALTOR to see if they have any experience working with the selected appraiser. While the Phoenix/Scottsdale Metro area is big, appraisers typically work certain areas and if your agent specializes in that area, it’s possible he or she may have come across this individual and have feedback (good or bad) to share.
4. Stage your home!
You want to put your best foot forward with an appraiser, the way you would when your home is listed for sale. The appraiser is quantifying the value the way a buyer would. Put on all your lights, tidy up inside and out, go ahead and get to that deferred maintenance that makes your home look just a little rough around the edges. Your goal is to feature the improvements that *add value* to your home. Don’t make the appraiser go searching high and low to find them. They want to get out of your house and move on to their next assignment.
Be on hand to answer questions and even take the time to point out features that you think set your home apart. The appraiser may or may not agree with what you think adds value, but if you point out something that he or she would have missed otherwise, you’ve done your job.
5. Chat with the Appraiser when he/she arrives
This is where everything ties together. By the time your appraiser shows up to do the interior inspection, your home should look great, the list of comps (see #2) and list of improvements (see #1) are ready to hand to him or her. It doesn’t hurt to be courteous to the appraiser and ask if he or she would like some water. Let them in, spend some time with them and then let them do their job.
This is when you might ask them how long they’ve worked in the area or whether they are familiar with where the school boundaries for your school district are. If he or she isn’t familiar with the district boundaries, make sure to point them out and keep asking questions. Then make a note of what they did or didn’t know.
If you get an appraisal where the value is far off from the comps that your agent provides you and what you estimated in your own mind, you may have grounds to fight the appraisal. Just be prepared to document all of the short comings of the appraiser who did the work. You might also want to have on hand previous appraisals (if they were recent) to provide the appraiser so he or she has some more insight as to what should be “comparable” to your home.
After the appraisal comes back…
You should receive a copy of the appraisal once the report is available to your loan officer. If you don’t get one, ask. If it’s a hard copy, ask for a digital one too. Put them both somewhere safe. Look at homes the appraiser used in the report and note how its features compared to yours. Look at the details noted for your home. See how they actually compare to your home. Note the size of the home (called the Gross Livable Area or GLA) in comparison to any approved plans you have or previous appraisals or tax records to make sure that value wasn’t excluded where it should have been included.
Sometimes the county gets the measurement wrong. When they do, they don’t always correct it. I sold aMcCormick Ranch home in 2017 where the county assessment is based on 2,487SF even though the city-approved plans state the home is 4,600SF! It was SO confusing to potential buyers & their agents… If you want to check yours, look for the assessor’s sketch here: https://maps.mcassessor.maricopa.gov/ Plug in your address and look for the “building sketch” to see what’s on file.
If the appraisal is in the ballpark, pat yourself on the back for doing a good job. If the value is low, start looking back to the turn of events to see where data may have been missed or to your own notes about the competency of the appraiser to see whether maybe he or she was not the best person for the job. Then call your loan officer to raise your concerns.
Sometimes they will work with you, but be advised, it’s rare that appraisers will admit wrong-doing. I’ve had maybe 2-3 appraisals overturned in my career. However, I’ve had more appraisers ignore me, tell me and/or the loan officers to go scratch or outright blame me or anyone else involved for whatever went wrong. It all depends on the appraiser and or his/her manager. But I can say one thing, the likelihood of this scenario occurring is much slimmer when the legwork is done prior to the appraisal. There are just fewer surprises.
Good luck to you!
(Originally written on 12/11/12; updated 6/23/18)
It’s 2018. Home automation has come a long way from uber expensive systems that took lots of wiring and money to harness. It’s easy to implement some of these tools for under $20. This video gives a brief overview of each.
How many of these could you use? If you want them, but don’t know where to start, call/text/email me and I’ll put you on the right path with where to buy & who can install. Enjoy your more convenient, efficient & secure home!!
When was the last time you asked “how are you” and didn’t hear a response involving the word “busy”??
We’re all wrapped up in the minutia of doing more with less, the endless imbalance of work/life & trying to achieve all of these things to feel good about ourselves. The end game is that we’re all overworked, over-tired, stressed & probably not having as much fun as we think we should. Believe it or not, these sentiments creep into our home. When real estate was BOOMING, this was reflected in our homes with opulence- luxurious finishes like marble, onyx, travertine, scrolling iron, rich, silky textiles & all that… stuff. Our homes were literally bursting at the seams with THINGS. We all know where that time went…
A few years back, a good girlfriend of mine & her husband built a home. She’s a wonderful person- and incredibly giving of herself and teaches their kids to do the same. They’re inclusive and very kind. As a result, they’re truly loved by all. Their family is incredibly fortunate were able to build the home of their dreams in a fabulous part of town with the help of very talented designers, architects and builder. As they went through the seemingly endless process of finding the right location, lot, planning the layout, flow & function, she was involved in each little detail. When she got to the interiors, one comment she made really stuck with me.
“I really want people to come over and feel like they’re at home- like they can relax and put their feet up. I want them to be comfortable” She nailed it.
Most homes especially at the price point of hers, didn’t achieve this in the past decade. Sure you can have “a room” or a space that’s comfortable enough for nights in and more formal entertaining. But that’s just it. Who does “formal entertaining” anymore? I for one have never served tea in my parlor… I don’t even have a parlor, nor do I want one. My idea of “afternoon tea” is to throw a pod in the Keurig, pull out a unique mug from someplace fun (Anthropologie anyone???) drop my shoes & put on my Ugg slippers. I will always serve real cream, but admit I haven’t used my formal china in far too long (I really need to stop that and use it!!!). The idea of going through all those extra steps, doesn’t appeal to me on the random chance that a friend is actually able to break away from her myriad of responsibilities with children, spouses/SOs, work, etc., etc.
However, not many homes reflect this lifestyle that we have, but they do. Over the last few years, I’ve watched the trends in home floor plans go from lots of formal spaces- formal living, formal dining, breakfast table, sitting room, blah, blah- to one cozy great room where everyone can congregate so that the cook won’t miss any of the fun! It’s not by accident that the Bohemian trend gained so much steam. The cozy cable knit throws, gorgeous Persian rugs, Encaustic (cement tile) & lots of green are popping up.
These styles are: tough, forgiving, well-worn, broken in, whimsical, and dare I say, fun, quirky & “tongue in cheek”? They won’t be RUINED if you have a bad day and are clumsy, “under the weather”, off, or simply “don’t give a f&*” (excuse the French). You can be… you. Unapologetically. This also resonates with buyers.
Have you heard of FLOR? They’re carpet tiles with a rubber backing that can be attached together, form a pretty water tight seal and can be removed washed or easily replaced if say your kid/dog/husband comes in and has an OOPS! moment on a few. I have them in my house and LOVE, LOVE, LOVE THEM!!! These are actually commercial flooring that was adapted for residential application.
My favorite part has been the COLOR!!!So many, too many homes are lightening up from the heavy browns, golds & tans of Tuscan or Old World designs to whites and grays or greige. Dark monochromatic brown is a bore, but who wants to keep beige or white pristine?! I sure don’t. Blues, reds, blacks & bright citrus colors are creeping in. My friend, me & most people I know are installing finishes like matte and/or reclaimed hardwood floors, worn brick, concrete & elements that will withstand hundred-pound dogs or kids who don’t take off their shoes…
Walking through Paradise Valley & North Scottsdale, I see home after home of this formal living that buyers refer to as “dated” or “needs work”. They simply just won’t go see these homes unless all the boxes are checked. That and they’re too big! Over the summer on a broker tour, I walked through a home on the golf course at Gainey Ranch that was about 6,500SF. The owners had clearly invested hundreds of thousands into custom features like tartan carpeting, color coordinated living room furniture, artwork and more. The listing agent looked at me and another agent and said, “Do you have any buyers for this home?” The other agent on tour grinned at me and said, “I’ve got no one…” It was all over the top, too much and too specific.
The same sentiment has popped up in agent feedback on my listings for the last few years. I’ve spent hours showing anxious sellers what buyers really are drawn to. They “get it”, but don’t want to do anything about it. I understand that, but this is all part of the experience for buyers. They want to come into something that they can enjoy *RIGHT NOW*. It’s easier to finance it too.
Life is too short not to wear fuzzy slippers, use the “good china” or have to put out a 3-course dinner so friends show up. That ought to be reflected in the way we live. After all, at the end of a long day, where would you feel more comfortable spending your precious time with your favorite people?
We’re in a legit seller’s market & have been through 2017 to this point. This summer, typically our S.L.O.W. season, was so busy that I haven’t had a vacation yet… The last 2 homes I’ve put in escrow sold with multiple offers after being on the market for a little while. It’s enough to make sellers crazy! That said, there are a few things you MUST keep in mind and a few things agents do that separate the rookies from the pros, who’re worth every penny you pay them.
Here’s what you need to know…
- Get bent out of shape! PLEASE. STAY. CALM. !!! I can show you scientific proof that your chances of making good decisions (i.e. wise choices- financial, far-reaching, irreversible, etc.) go out the window when your heart rate exceeds so many beats per minute (BPM). If you’re not careful, you could lose the sale & blow your chances with other buyers too. I once had 20 offers on an REO listing I had in Laveen years ago. I had to make it through the top 6 or 7 before I found one that stick. Losing your momentum is the worst thing to happen to a listing that’s hot out of the gate!! The next place to stay calm? After you receive the Buyer’s Inspection Notice (AKA “the BINSR”).
- Be too demanding. There’s a lot of emotion in selling a home, especially when 2 buyers want YOUR palace. It’s easy to get a little opportunistic and start expecting the sun, moon & stars. Buyers are flaky- they are very emotional too. An emotional buyer & seller is a recipe for disaster! This town isn’t that big (I grew up outside NYC) and people (read: agents & buyers) talk. In close-knit communities, like Arcadia & PV, sometimes I know exactly where buyers who walk away from my listings are headed.
- Stop showing your house or keeping it show-ready. Just like take off & landing are the most likely times for an airplane to crash, the inspection period (typically the first 10-15 days) & the closing are the most volatile times during a home sale. It ain’t over till the fat lady sings- the fat lady is the escrow officer or me telling you the escrow officer sang. I can spot things going sideways from a mile away. Sometimes I may just sound cynical, but I’ve seen a lot. And what I haven’t seen personally, my colleagues have warned me all about already. Please stay on the straight and narrow if you want to cross the finish line with minimal drama.
- Share details of the sale price or terms with- neighbors, friends, your agent friends… There’s a reason the Realtor® Code of Ethics forbids us to share the details of a sale with anyone, without the seller’s written permission! I had multiple offers on a listing I just put in escrow. I’d had 4 offers before finally reducing the price one more time and getting multiple offers. The 1st buyer to the table had a number that was substantially above a previous buyer who was sniffing around again. The next buyer knew of the first one on the table and came in with a VERY strong offer & terms. The next buyer was someone I showed the house to myself. He wasn’t aware of the other 2 and verbally planned to come in MUCH lower. When it finally sunk in he wasn’t alone, he wanted me to share “the number” with him. I refused. He said, “I’ll match the offer you have.” I said, “I can’t tell you the number or terms. Please tell me what it’s worth to you and I’ll write it up”. I wouldn’t give in, but can say within an hour he was willing to go $25K ABOVE my initial list price! Funny thing though, this cash buyer was never was able to get me: his proof of funds, the details I needed to write up his offer, etc. Good thing I didn’t give in, get my seller all wound up on an unrealistic number that never materialized anyway…
- Have a plan for a fast exit– rent, buy something else, move away. Nothing is worse than having no plan at all. In spring 2015, 2 clients’ home sold in days (at the same time). Though one seller was in 85254 & the others were in McCormick Ranch and they were on different paths, they had to get out fast! The solution for both were fully furnished seasonal rentals. The couple stayed at theirs for about 6 weeks before relocating out of state and the other stayed for a month, and then another month and then scrambled to find something long term before the rent jumped up at high season! I’ve done that charade myself and it can be a bit scary, especially if you’ve got your whole house in storage and kids/pets trailing behind you. Whether it’s Hotel Mom & Dad or a 6-month rental with a flexible termination, figure it out right away.
- Make a list of what you need & want from the sale, then choose wisely from your offers! If you’re a low-stress, low drama seller, a buyer who is a pain in the A$$ from the start, will probably be a pain in the EVERYWHERE in your body by the end. Trust me on this one. Pain in the a$$ agents are the same. If I had a nickel for every time a seller said “it wasn’t worth the extra $X to deal with…” Actually, they never say it, but the sentiment seeps out of every pore of their body every time we speak…
- Look at the ENTIRE OFFER & TERMS before you make a selection or counter. “Highest and best” offer isn’t always the *best* offer for the seller!!! Even if you get an extra $10K, incurring an extra $5K in moving expenses for “rush” move & the hassle of figuring out how to locate a house that hasn’t existed for 9 mos (IT HAPPENED TO ME!!!) may not be worth it. I can’t emphasize how much the “little things” make a difference. Being able to lease back, buying all the furniture, cash sales with no appraisal, a fully pre-approved buyer with money already at escrow.
- Pick a good agent who knows most of this ahead of time… like ME. Duh!. 😉 All kidding aside, agents who’ve experienced the ups and downs of the market have good memory (or should). Making the same mistake over and over is crazy-making stuff. There’s a movie about it… “Groundhog Day”, coincidentally my birthday. Trust when I say, “don’t do X”, there’s a reason for it. I won’t say “I told you so”, but knew it would blow up & really can’t help with:
- Buyers freaking out because the seller choose not to repair an item(s) the buyer’s agent specifically said was a “big deal”
- Expecting a fast sale on a dated home in Paradise Valley, DC Ranch, North Scottsdale priced over $2M (under-performing market), even though the rest of the market is “UP”
- Not understanding why the house didn’t appraise for the sales price, even though I told/showed/promised you I had nothing to support that value
- Being surprised when some repair I brought to your attention before we listed, is suddenly a big deal *now* (i.e. a bad roof)
Trust me. NO ONE hates for a deal to fall apart more than me. In 12 years, I’ve been around the block though. Even when times are good, it pays to have a healthy dose of reality in your back pocket. When it’s all over, we’ll laugh about it over lunch/cocktails/coffee/whatever you want. I just need to get you get to the finish line… With that, I’m off to argue why ~$10K in repairs doesn’t equate to a $25K price reduction for my sellers… (couldn’t make this stuff up…).
Have a great week! ☀️
You remember that pet name on “Seinfeld” right?
It doesn’t even MEAN ANYTHING, but we all got it. It’s a little too emotional. A little irrational and kind of annoying…
Believe it or not, “Schmoopie” kind of goes hand in hand with “There’s no place like home…” (I know I’m reaching, but just stick with me on this…). It all sounds totally cliche, right? But, who knew that when Jerry muttered those words that they’d collide some day with Dorothy’s and make so much darn sense!
Our “home” is our sanctuary, kingdom, etc.
It’s the place where we open our eyes to start our day, where we lay our heads at night, hang out and let it all hang out. Did you ever think yours would be anything more than a few walls that contain all our stuff? “Home” is also where we retreat, find strength, pull ourselves together after defeat, yadda yadda.
As a Realtor®, I’m amazed at how lightly many would-be buyers & renters take this. Don’t get me wrong, many buyers absolutely understand just how important this is, but so many mores squander the opportunity. Yeah, I’m sure you’re skeptically muttering under your breath something along the lines of “champagne tastes… beer budget”. You’re missing what I’m saying.
“Home” doesn’t represent the latest design dream drawn up on HGTV by the Gaines’ or Property Brothers.
I’m talking about the *real* stuff… waking up in the AM and hearing, seeing, smelling & tasting things that ground you. Knowing you can WALK, run, hike or ride out the door to something that means a lot to you. Let the emotion and sentiment guide you, but NOT blind you to reality.
Here are a few tips to make sure you get a good one…
1. Think about what you need.
It’s knowing that the park where you do your circuit training, your favorite coffee place or grocery store or hiking loop, your bus stop, and even your job, if you work A LOT, is close by and you can retreat there in a heartbeat.
What does your ideal morning and/or evening look like?
Do you really not care about either of those but relish afternoon lunches at home? What do those moments look like?
Where’s your dogs’ favorite walking route or dog park?
Lest you think I’m off my real-estate rocker, clients like a couple I ADORE, bought their house just off Murphy’s Bridle Path in North Central Phoenix because the backyard reminded the husband of a favorite pond when he grew up & the wife of the trees in her native European country. Another couple I worked with spent an entire weekend biking the greenbelts in McCormick Ranch before professing, “This is it! *THIS* is where we want to be!!”. They loved that area until it no longer suited the needs of their families. I have tons of stories like these.
You can’t put a dollar amount on any of this. It doesn’t need to be deep. It definitely doesn’t make sense, but being aware of these details could profoundly impact one of your life’s biggest purchases.
2. Make a list.
Seriously. Don’t keep it all upstairs and hope you can recall it at a moment’s notice. I promise you. Inevitably, you’ll be “blinded by the pretty” of some aesthetically pleasing aspect of a home. You’ll forget all about [Kyle Jeanne, Sammy, …], the [barrista, butcher, server, convenience store clerk] right down the street in your current hood [Old Town Scottsdale, Willo, Kierland, Arcadia, …], who makes your [coffee, oatmeal, eggs, knows which newspaper.] *just the way you like it*. EVERY. DAMN. DAY. You’ll kick yourself if you don’t. Or maybe you’ll do what I say and just be happy.
3. If you haven’t put a ring on it (or received one) yet, PLEASE don’t let your Schmoopie help you make the list.
Schmoopies come and go… This is YOUR pad. YOU pay for it & may really pay for it if the place sucks or the relationship doesn’t work out… They don’t even need to know about your list. I won’t tell them… Promise! 😉
A couple who searched in vain to find the *right* home followed my advice and brought their list with them when they bought their 2nd home from me. The checked off each of the boxes in glee as they confirmed the home they were standing in, in N Central Phoenix was “their perfect home” (they knew they were on to something) REALLY WAS their perfect home. Think I set the bar high? Not really. The 1st one I sold them near Uptown Phoenix was “too perfect” and they almost didn’t buy it!! LOL Don’t be intimidated. This home doesn’t have to be the “end all be all”. It just has to be the “end all be all” *right now*.
The Final Takeaway:
Whether you’re buying or renting, put some thought into this and get organized. You’ll probably live wherever you end up for a while- at least a year right? Life’s too short to be unhappy. Find your inner Schmoopie and go get yourself someplace good. I’ll help you! 🙂
In a nutshell, here’s a market recap of how real estate went down in April…
“Seller Concessions Have Risen Despite Buyer Frenzy
Buyers continue to find themselves in a frenzy of competition for homes as March recorded the highest number of non-distressed sales through the MLS since September 2005. While supply has dropped a significant 12.7% overall compared to this time last year, it’s dropped a whopping 22% in the Southeast Valley and 27% in Pinal County! Despite the extreme lack of supply under $300K, 30% of closings in this price range are showing some form of seller-paid concession at close. Compare this to 27% in March of last year and it indicates that even as demand and prices are on the rise, a larger percentage of sellers are contributing financially to closing costs, home warranties and repairs in order to get top dollar for their home.
March 2017 recorded the highest Listing Success Rate for normal listings since July 2005 at 81.8%, which means more homes are coming off the market because they successfully sold and not because they cancelled or expired. In a balanced market, the Listing Success Rate ranges between 60-65% for this time of year. To compare, the lowest Listing Success Rate was recorded in December 2008 at 21% and the highest was in May 2005 at 87%.
Normal listings between $100K and $200K currently have the highest success rate at 90%, followed closely by the $200K-$300K range at 87% and $300K-$500K at an impressive 79%. It’s a good time to be a seller!” – source The Cromford Report
The market is strong! At face value, this is all good stuff, but what the numbers don’t say is that supply is not evenly matched with demand at all price levels- namely the high demand for affordable homes (under $300K) & very little supply; conversely, there’s lower demand for luxury homes, and LOTS of supply. And seller concessions (sellers pitching in cash to help their buyers close)? Whaaaaat?! Stay tuned for more!
Here’s a quick video about wire fraud- what it is & how it can affect you.
QUICK NOTE: As I prepared to do this vlog, I received an email from an escrow officer in Las Vegas whose email signature had been swiped and slightly altered so the phone number was off by a digit or 2. They were trying to get me to download something but her email signature contained this:
“**Be aware! Online banking fraud is on the rise. If you receive an email containing WIRE TRANSFER INSTRUCTIONS call your escrow officer immediately to verify the information prior to sending funds.**
Section 1 of Chapter 355 prohibits data collectors doing business in the State of Nevada from transmitting any personal information through any electronic, non-voice transmission (except fax) to anyone outside their (the data collector’s) secure system unless encryption is employed”
You JUST CAN’T make this stuff up!!!
Have a great week!!
“Mortgage rates are going up!”
Yeah…….. I hear that a lot. But what does that mean and how does it affect you? Is the sky falling?? The short answer is “a little”. The Federal Reserve lowered it’s interest rate (“Fed Funds Rate”) or the money banks pay to borrow money before they loan it to use for more.
A loan officer at Wells Fargo in Scottsdale forwarded me his mortgage interest rate sheet. I try to stay current and make an effort to look from time to time. For grins, I compared my current mortgage interest rate with the one they quoted on their rate sheet. My current rate (3.625%) is lower the one on this rate sheet.
Rates dropped before the election and rallied afterward, but they’re still low. In the last ~5 years, they haven’t moved very much. Yes- market fluctuations affect your buying power (up and down). (Note: the rates above are the AVERAGE for the US- they may be higher or lower depending on where in the US you live.We’re coming out of a period of historically low rates when you compare them to interest rates in the teens (Yes! 12%, 14%, 18% for mortgages) during the 1980s.
My takeaway and advice to you? Don’t listen to anyone about the rates did before. It doesn’t matter what rates were in the 80s if you weren’t buying a house or what they were 5 years ago. The only thing that matters is TODAY. Does the interest rate and mortgage payment make financial sense for you today and for the foreseeable future? It’s a yes or no answer. Period. If it doesn’t work, what are your options to make it work? If there are none, do not proceed.
Make sure you ask yourself, “Which direction are rates trending?” If they’re going up and you’re buying, get out there and find what you need! If you’re refinancing your mortgage soon, speed up the financing process unless you want to pay more for the same loan. If they’re going down, you have time to lock a rate and potentially pay less. If they’re stable, you have a little time to think before you make a decision.
However, you need to know the rates will always change and YOU will need to do keep doing your homework to protect your interests. You’re not in it alone, you can always ask for help (me, a lender, a trusted friend or family member). Make sense? 😉
I’ll be the 1st to admit, I hate being in front of a camera, but I’m back at it again. Watch this video for a quick run down of what’s going in our area, over the next few months:
Here are the links to the events I mentioned if you want to get more info or buy tickets:
- 2017 Waste Management’s Phoenix Open (AKA: The Greatest Show on the Grass): https://wmphoenixopen.com/ (can’t for get the party at the Bird’s Nest: https://wmphoenixopen.com/tickets/birds-nest-tickets/ )
- 2017 Scottsdale Arabian Horse Show: Scottsdale Arabian Horse Show :: Arabian Horse Association of Arizona
- MLB Cactus League Spring Training: http://www.cactusleague.com/
- 2017 NCAA Men’s Basketball Championship; Don’t even know how I forgot to mention this one… it will be played right here in Phoenix on 4/1 & 3!!! http://www.phoenixfinalfour.com/
There are 2 sides to this story- one for Sellers & one for Buyers. There are pros and a whole lot of cons. Let’s take a look…
Frequently, frustrated sellers with homes to sell find themselves with a willing tenant throwing the “lease-option” or “lease-to-own” plan into their lap. There are still lots of sellers in Phoenix & Scottsdale, who bought homes between 2006-2008 when the luxury market peaked, who are still unwilling to sell their homes at current market value, likely below what they paid when they bought. In ’08 I watched a seller decline a clean, but lower-priced purchase offer for a shinier lease-option… Let’s just say, I don’t believe that property has sold since.
If you’ve ever asked me about doing along the lines of “lease purchase”, “lease-option”, “lease with the option to buy”, etc., this, I may have said something slightly warmer than “Hell no!”- but not much. Aside from the fact that I’ve never seen one actually close (not even if I’ve personally been party to it), legally it can have negative implication for sellers. My broker, Realty Executives’, & our attorneys frown heavily upon these agreements. Finally, I once heard that the statistical probability of completing the agreement to a closed sale is ~22%, but I don’t have any concrete numbers to back that.
If you ever wanted an additional opinion about it, the AZ Association of Realtors (AAR) weighed in with their thoughts. Here’s what they had to say (note: that’s their title, not mine):
You may not be familiar with “recording” a lease. We record (make public record) real estate sales & loans with the county recorder, but leases are usually drafted and executed without recording. Options are a little different because they give an irrevocable right to the tenant to purchase the property within some pre-determined amount of time. The landlord/seller doesn’t have too many ways out if the tenant/buyer can’t perform. They are subject to the whim & follow through of the tenant/buyer. Even when you have hefty, non-refundable earnest & security deposits, if you decide you need to sell, you may not be able to do so quickly…
Note: One of the most important lines of this discussion is the very last one:
“Please note also that unless the lease and option to purchase contain cross-default provisions, a breach of the lease by the buyer and subsequent eviction by the seller may not prevent the buyer from exercising the option to purchase.”
Then there are the other risks to Sellers:
- Tenant/buyer fails to qualify for a new loan (lacking the down payment, credit, job history, etc.)
- Landlord/Seller suddenly needs the money from a sale now, but the option is still good for another… (X amount of time).
- Even if the Tenant/Buyer assumes all maintenance, they don’t actually have the ability to make a critical repair that arises
- Tenant/Buyer, tries before they buy and change their mind…
Sure, it looks pretty grim for Sellers, but if you’re a buyer considering a lease option, there’s a lot you need to know too! Chances are you want to lock in today’s price for tomorrow. Maybe your credit history isn’t good and/or you don’t have the down payment or income you need to buy a home today, but you will… soon!
Most landlord/sellers want a sizable sum for the option”- maybe a few % of the price of the home, which could be several thousand dollars up front. They may want an inflated (from market) rent price, from which a portion gets set aside for your down payment down the road.
There are risks to Buyers too:
- Will the Seller keep the existing mortgage(s) paid & in good standing?
- Are there any “latent defects” (AKA the roof/plumbing/electrical/HVAC unit on its last legs) the Seller hasn’t disclosed because they’re not really a problem, yet?
- At the end of the lease option period, are you sure you’ll have all your ducks in a row to buy? If not, what will you lose?
- What if the money you pay for your option and/or monthly rent premium vanishes, when you have a valid reason to cancel?
- What if you don’t record your option (most aren’t) and the seller sells the house out from under you?
It’s a 2-way Street- what’s good for one is probably bad for the other
Aside from all the risks to Sellers & Buyers I mentioned above, there also the unknowns:
- The value goes up, but the price is fixed lower- Buyer is glad, Seller is MAD!
- The value goes down, but the price is fixed higher- Seller is glad, but buyer is MAD. BUT… buyer now can’t qualify because the house won’t appraise…
- Buyer never had any intention to buy, but has a good lease in place…
- Seller demands contract terms that the buyer is unlikely to ever meet…
The Devil is in the Details:
How you draft the contract is important. This is not a simple, everyday transaction. Everything from, the purchase price, lease length, deposit amounts, clauses for default (either side)… must be pre-determined. The terms need to factor all of these details and MORE! The final document WILL be complicated- these transactions usually are. If both Tenant/Buyer & Landlord/Seller are not savvy, knowledgable participants, one or both have much to lose.
Sure, you can hire an attorney to do the legwork or a lender with strong knowledge of qualifying a Buyer for a lease-option agreement, but unless they’re familiar with both the lease & sale markets, trends & even buyer financing, they may not be the best ones to advise either party from start to end. Both parties really need to know who you’re dealing with and plan for just about everything. If Buyer & Seller don’t have a vested interest in a win-win outcome, a lot can go wrong.
All this said, Buyers & Sellers DO benefit from these types of agreements. There are also other ways to accomplish the same thing without it being a “lease option”. Participants who pull this off are usually sophisticated with this type of deal and have lots of stop-gap measures to avoid the pitfalls. If you have any hesitation you fit that description, this may not before you… We’ve scratched the tip of the iceberg, but consider yourself “informed”.
If you’re still not sure how to avoid all the pitfalls above or completely understand what they are, we need to talk… There are other options outside of *this* one and I can tell you all about them!
Happy New Year!