Every February, the state sends out its property tax assessments giving homeowners 60 days to appeal their assessed values, and subsequently their property taxes. This year, the annual assessment mailing will include a return-postage card that homeowners will specify whether their properties are class 3- Residential Owner Occupied homes or Class 4- Residential Rental.  Select that your home is class 3, that you occupy and live in your home as a primary rental and you will receive up to a $600 tax rebate. Select class 4, that the home is a rental property or 2^nd home and you will forego the rebate and pay more taxes.  Mind you, these taxes go to social programs, education and other state-funded programs.

This year, these mailings will go out on February 25^th and homeowners who are unaware of this change will see their tax bills go up and not know how to rectify the situation.  When this postcard comes in the mail PUT IT ASIDE SAFELY OR SEND IT BACK RIGHT AWAY!!

It used to be that every property declared as class 3 was assumed to be correct unless the homeowner stated otherwise.  Now, it’s the reverse- properties are assumed to be class 4 unless the homeowner declares it as class 3!

Originally this law passed a year ago as part of a package to provide $538M in tax breaks for businesses. Lawmakers believed that reducing business property taxes would shift the burden of making up these taxes to homeowners, so they altered the formula to calculate the rebate.  The law was intended to catch taxpayers who were claiming rebates for which they truly didn’t qualify.  This is the case of many homeowners who lived in their homes at some point, but had moved out of them and converted them to rental properties for various reasons.

BE AWARE: Homeowners may claim ONLY ONE rebate, regardless of the number of properties they own.  Vacation homes were previously eligible for the rebate, but that’s not the case any longer. These homes will be treated as though like rental or other income properties.

New legislation is in the works to limit the number of mailings that go out. For instance, if you purchase a property that was previously class 4 property and a buyer purchases as class 3, declaring at close of escrow that the home will be used for residential use, revisions would not require that a post card be sent back with a declaration. However, property owners who have differing property addresses and tax mailing addresses may continue to receive these cards that they send back.

The penalty for those caught abusing this law is 2 times the amount owed of the rebate that was claimed improperly. Given the maximum for this rebate is $600 per year, the maximum fine is $1200, not huge, but today, every little bit counts.

State realtors are working hard to repeal or amend this mandate and help homeowners who truly qualify for the rebate. The ultimate outcome is still to be decided but, for this year, homeowners need to be prepared to take this simple step to rightfully claim their property tax rebate.

Learn more about ARS 42-12052

Read additional press about this legislation

Help may be on the way.  If this legislation being floated around Washington to remove the barriers that prevent homeowners from being able to refinance their homes currently at higher interest rate and/or adjustable loans into lower, market-rate loans (currently interest rates hover around 4%). To many it's the difference between staying in your home and (or being able to move up/down, or out of the area for that matter) and staring down that proverbial road to short sale or foreclosure that millions of other Americans are struggling with.

ARMLS Stat Plus for Q3 2011 (Link to data)

According to ARMLS newly released Stat Plus for Q3 (see link above), homes under $100K is now down below a 2-month supply. This means would-be investors, first-time buyers and snowbirds alike are all clamoring for a piece of the action, resulting in insane bidding wars with just days on the market and frustration across the board.

Serious buyers looking to find a home on a timeline will have to get their ducks in a row (cash buyers too).

Successful buyers using financing will have the following:

Completed Prequal letters from lenders (make sure they are not expired!
Money available for an earnest deposit
Documented source of down payment/gift funds

Cash Buyers will need proof of purchase funds for the full purchase price on a recent (within 30 days) statement; a letter from your financial institution may not cut it anymore.

Be prepared for terms on lender-owned properties like:

Switching from FHA to Homepath (Fannie Mae homes)
Bigger earnest deposits ($1000 may not do it anymore)

I'm even hearing some sellers are asking buyers to (hold your breath) waive appraisals. What year is this?!

My suggestion for buyers who intend to live in the home, consider homes that need work and get a renovation mortgage. A few are:

FHA 203K
FHA 203K Streamline
Fannie Mae Renovation
Fannie Mae Homestyles

When you can't get (or afford) homes that are perfect and turn-key, consider finding a home and financing the repairs into the purchase/loan amount.  That dump in the great area you like, might start to look like a better option if you can fix it and not have to dig to find the money to do it from your savings.  Since rates are low, the cost to financing the purchase AND the repairs is relatively affordable.  The key is to find a good lender.  I can help with that- all you need to do is ask me.

Happy House Hunting!!

Apply here to seed if you qualify for assistance

AZ Depart. of Housing is trying to spend $269 million in federal foreclosure-prevention funds by offering homeowners $4,500 & to pay their 3% closing costs to work with their lender & complete a short sale instead of losing their home to foreclosure.  Housing Director Michael Trailor said the state agency will start taking applications for the short-sale program today. Go to housingaz.com to apply. It's the same site that is taking applications for the principal-reduction loan-modification program and unemployment mortgage aid, both of which also are being funded by federal money from the Hardest Hit Housing program.

I originally posted this article on Facebook on December 6, 2010, but several times/week I get questions from all kinds of buyers looking to make a first home purchase, buy a first investment or expand their portfolios and I thought this was pretty relevant still.  Though our market in the Phoenix Metro Area has changed- then there were over 45,000 homes, today there are just under 27,000 homes on the market and of those just over 19,000 are available with no pending contracts. The info is still very much relevant and I hope it provides you with the "lightbulb" you've been looking for to start (or continue) your search for real estate.

When I ask most potential buyers I meet what they want in a home they tell me they want a “deal”- some go a step further and say they want a “smokin’ deal”.  In a market where there are over 45,000 properties listed, one would expect that to be pretty easy. BUT, in fact buyer’s searching for a quality home (structurally & mechanically sound), in a good area at a good price will tell you otherwise.  It seems like every day I have a buyer shaking their head saying “I just don’t understand how there are NO good houses to buy with so much on the market!”  Here in metro Phoenix, where the average sale price for a home is $163,506 and affordability is relatively high, the competition is fierce.

“One man’s trash is another man’s treasure” always comes to mind.  What may be an awesome deal to some is trash to other buyers. Knowing what you want in a home is the first step in making a prudent real estate purchase.  Though many homes on the market are the product of our overall distressed economy, many are not the “turn-key” or move in ready homes that most buyers crave. They may need new interior or exterior paint, repairs from deferred maintenance; appliances may have been taken, at a minimum. Others are literally stripped bare from desperate homeowners trying to salvage anything/everything they can as they lose big on a bad investment.

As a result, many of these homes are “undesirable” leaving door open for the next buyer who is willing to roll up their sleeves and put a little work into a home.  Because of this, there are deals to be had for those willing to put their time and money into it. Don’t exclude a home just because the appliances are gone, as I’ve literally seen some buyers do.  If you are in a position to put down 10% or more on a home pull some of that money from your down payment and earmark it towards repairs. For instance, if you are buying a home for $200,000, and new appliances or repairs cost $2,000, that represents only 1% of the total cost of a home. That’s almost nothing considering you are making a direct investment in the home itself.  Ask the seller for a $2,000, credit toward your closing costs instead and that’s $2,000 more than you would have had otherwise.

This leads me to my next most likely way to find a deal. Often homes that sit on the market for a long time gather the speculation that “something’s wrong with it”, when it may in fact be that it’s always been buyers' 2nd choice.  It may have had a contract fall out or the seller just priced the home incorrectly and they’ve “chased down the market”. Do not discount these homes.   Most sellers that want to sell will get to a point where they just want the home SOLD and they may discount the purchase price or make concessions that they would not have otherwise considered earlier.  Always hire a professional do an inspection to verify the true condition of the home.

Next, I don’t think any buyer is concerned about insulting a seller with an offer, but don’t throw something ridiculous out there to “test the waters”.  Make an offer you could live with in a “take it or leave it” fashion and see where it gets you. My best discount to date was a home that had been listed for 192 days with a list price of $575K.  After making an initial offer of $480K, My clients ultimately purchased this home for $505,000! Three thousand dollars made this deal. The sellers waffled at $502K, but at $505K the deal was done. Persistence and patience usually pays off if a buyer is truly serious.

The next thing to consider is location (how accessible are jobs, goods school and amenities like shopping, dining and recreation).   It’s the first rule of real estate. Buying the smallest dumpiest home in the best neighborhood is always more prudent than buying the biggest and most expensive home in the neighborhood.  The sale for $505K I mentioned was exactly that; a smaller, well-maintained home on 1 full acre without the niceties one would expect in the tony neighborhood where it was purchased (the home 2 doors down is literally listed today for over $2M!  After planning a larger remodel in the future, I don’t think it will be long before this home comes somewhat in line with what the values the neighborhood will bear. It will never be a $2M home, but it will come closer to the $1.434M average that this town had in the last year.

Putting all the details on paper is also a good way to figure out if you have a good deal on your hands.  Expenses like taxes, HOA, utility costs and more can make or break a deal, literally. For instance, my family personally bought a home last year that was about 800SF larger than our previous home that we sold, however, due to the fact that the home we bought had newer heating/cooling systems, newer low-e windows and other energy saving features, our utilities are roughly the same!  So the net cost of our new home after buying it as a foreclosure from a bank is really only a few hundred dollars more than we were paying before- more than worth the cost for a bigger home with more amenities. Consequently, buying a home with substantially higher taxes or insurance costs, a steep HOA or older mechanical systems or more yard to maintain, etc. can really make what seems like the best deal really more like a financial disaster.

My last recommendation to find a good deal is to consider the traditional seller who is not facing foreclosure or having to short sell to get his/her home sold. These sellers may be the ones who bought their home cash, 20-30 years ago and/or has paid down the mortgage to an insignificant amount.  These folks that HAVE to sell and their hand aren’t held by a bank as to what they can or can’t sell represent a HUGE opportunity for buyers. Not to keep bringing it up, but this was the situation for those same folks who bought their house for $505K, as well.  The sellers were going through a divorce and had to liquidate assets.  They were not short-selling the home. Mind you they were not happy about taking the $110K hit from when they purchased it 6 years earlier, but they could do it and still walk away with about $1,000 in each of their pockets.

Please keep this in mind when you are out there looking. What seems to be the boring, least sexy property can truly pay off if you have the vision to look beyond the obvious: a too high price, so-so condition (or worse) and a long time on the market.

This is where it pays to have a licensed professional representing you and helping you to do this legwork.  I regularly do this for my clients and if you’d like me to help you with this process, let me know. I’m happy to do it again. Even if you don’t live in my area, I’m always happy to lend an ear and give my honest opinion.

Camille Swanson

2011 Temporary FHA Loan Limits About to expire in many counties in Arizona.   This affects many buyers throughout the US looking to purchase for 3.5%.  If you live in Maricopa County, AZ and are using an FHA loan to purchase a new home, be aware that the loan limit which was $346,250 will decrease to $271,050.

Congress has not acted to extend the temporary FHA maximum loan limits. If they take no last-minute action, on October 1, 2011 the current loan limits will expire and revert to the standard FHA loan limits set back in 2009 ($271,050). For many counties in AZ, i.e. Phoenix Arizona this means a max FHA loan of only $271,050. 

You will need to submit your FHA loan applications BEFORE September 15, 2011 IF the loan amounts exceed $271,050 AND the property is located within Maricopa County/ Phoenix Arizona. The FHA max loan amount varies by county, so check with a loan officer in the area where you are purchasing if you are concerned about how the expiration of the temporary FHA loan limits will affect other counties in Arizona and across the nation.

Please refer to the following HUD link for loan limits in your area: https://entp.hud.gov/idapp/html/hicostlook.cfm
Other temporary loan limits on conventional programs are also set to expire, although these mostly affect more expensive markets/areas within the country. Phoenix is not considered a "high cost" market but an area like Los Angeles, San Francisco or New York City would be.  Ultimately, borrowers using FHA loans to financing a purchase may have substantially less buying power than previously and will need to adjust their plans accordingly.

Greater Phoenix--Single Family Detached-

Market Headlines

Market is very strong below $100,000 but quite weak over $200,000
Average sales price per aq. ft. is rising for homes under $100,000 and stable up to $200,000.
Pricing is weakening for homes over $200,000 with those over $800,000 looking most vulnerable.
A sharp deterioration in demand is now evident at price ranges over $400,000.
Foreclosure activity is declining and REO inventory is falling very fast, especially at the lower price levels.

Overview

The market in Greater Phoenix has completely reversed since the fourth quarter of 2010 when the bottom end was over-supplied and getting weaker. Now the strongest demand is below $100,000 and inventory levels are dropping fast even during the late summer when they normally increase. Demand from investors for homes they can turn into rentals is very significant. In contrast the higher price ranges were relatively strong over the past year but are now suffering from a sharp fall in demand.

Homes under $100,000

Demand strong while supply continues to fall. Prices continue to climb.
The sales count was almost identical to July and an amazing 61% higher than August 2010.
Pending sales are down 3.3% over last month but are still 49% higher than last year.
Supply is still falling fast, down 7.9% in the last month and 23.5% in the last quarter.

Homes between $100,000 and $200,000

Supply down but demand is down too. Pricing has now remained stable for thirteen months.
Supply has fallen another 3.6% in the past month and is down 15.6% when compared with April and 46.9% compared with August 2010.
Short sales and pre-foreclosures now comprise over half the active listings and REO's are less than 15% their lowest share for several years.
Demand continues to decline, but sales are up 13.5% compared with last year while pending sales are up 6.5%.

Homes between $200,000 and $400,000

Supply stable and demand fading. Pricing is stable but could weaken over the near term.
The supply of single family homes priced between $200,000 and $400,000 dropped by only 0.6% between July 26 and August 26, much less than the other price ranges.
However, it is down 8.7% over the last three months and 33% over the last year.
Over the last month REO supply fell by 1.8%, while short sales and pre-foreclosures fell by 0.3% and normal listings fell 0.5%.

Homes between $400,000 and $800,000

Supply now stable but demand is weaker. Sales prices may lose the stability established over the past year.
Single family homes between $400,000 and $800,000 have seen active listings stabilize at at just above 1,900 over the last month, but this is down 31% compared with this time last year.
The sales volume weakened noticeably in August, with monthly sales down 15% compared with July but up 2.6% compared with August 2010.
Months of supply now stands at 6.1 months up from 5.2 last month.

Homes over $800,000

A weak market. Demand is now falling faster than supply and prices are declining.
We have just experienced another poor month for the luxury market.
Admittedly the monthly sales rate was 3% higher than last year, but pending sales are down 18% compared with last August and 14% lower than last month.
Months of supply is at 14.3 months, while days inventory edged downward to 392 which compares favorably with the 497 we measured twelve months ago.

HOAs have long been the enemy (or friend- depends on how they're treating you today) of many homeowners. Responsible to enforce the CC&Rs and Association Rules & Bylaws, their job is to keep consistency among properties and ensure that everyone pays their fair share of dues and/or assessments.

However, with the economic downturn, more and more HOAs are left to shoulder the burden of those who can no longer afford to pay and banks who either pay late or try to stick someone else with the bill. As a result, the HOAs are swinging back. Put in the precarious position of having to maintain the continuity (& lights and common areas) for everyone else who does pay, they have to make do with whatever their budget and reserves will allow.

True story, I list bank owned homes and have for a few years now. After getting tipped off by my bookkeeper that the electric had skyrocketed on a vacant 2 story luxury townhome in Tempe, upon investigation late last night, I was SHOCKED to find out, someone had run 3 outdoor extension cords from my listed home to an outlet in the common area just next to the entrance gate to siphon off electricity for the common area of the community- I'm (well, really Fannie Mae) getting stuck with the bill to light up the main entrance!! (Note: as of when I wrote this blog, no one is available at the HOA management company to respond). My once $40-50 electric bills skyrocketed to $343 in ONE MONTH due to whoever had the gall to pull that stunt!

On the flip side of the coin, HOAs are having to get aggressive with non-paying homeowners going to extremes like hiring private investigators to track down those who ignore notices, placing liens on homes and even foreclose as though they were a bank. This has homeowners downright steamy despite the fact that homeowners are the ones they are trying to protect. In some instances where there is no management company, homeowners are pitted against their neighbors to try to keep the rules enforced and payments coming in.

Whereas once when you bought into a community, typically new buyers would pay a nominal transfer fee (frequently split or absorbed by the buyer or seller) of a few hundred dollars. Now, homeowners buying into communities may find themselves paying hefty fees or upfront sums to beef up the HOA reserve accounts AND find out that what they thought was a small monthly assesment is more like an albatross.

About a month or so ago, I was under contract with a client on a home in the tony Biltmore (Phoenix) area to purchase a luxury condo that had been picked up by the seller at a trustee's sale and was being sold for a fraction of the going cost. Upon further investigation of the HOA financials, we discovered that the developer had not been paying his share of the monthly assessment on roughly 15 unsold units. After 3-4 years of nonpayment this equated to a $300K+ deficit in the budget and a domino-effect bout of lawsuits (homeowners against the developer, HOA against the developer, homeowners against the HOA)- it was a nightmare. Additionally because of the effect of 20% of the units not paying dues the monthly assessment went from roughly $500/mo to almost $800! Conventional financing also went out the door due to the number of non-paying units being so high. My clients promptly canceled after the fear of some unforeseen, unbudgeted cost that would result in some outrageous assessment hit them like a baseball bat.

The long and short of it is this: though they are easy to blame HOAs are entities struggling to maintain the status quo like many other Americans do every day. When push comes to shove, they have to protect themselves financially whether or not it suits all of their individual homeowners. The flip side is buyers have to be extra vigilant when purchasing in to communities where HOAs exist, especially for multifamily projects because HOAs have a greater liability for everyday costs with larger amounts of common costs than it's single-family counterparts. Be sure to read through the HOA financials provided with a fine tooth comb.

If you don't understand what you are looking at, ask someone who will. If you don't like what you see, this is grounds to exit the contract. So, make sure to READ & UNDERSTAND all the details (CC&Rs, Rules/Regs, financials) BEFORE you complete the purchase. You wave your rights walk away after you close. If you are aware of what's at stake, it can save you the hassle of finding out you've locked yourself into a community that will not work for you and your family.

Please feel free to send me your HOA questions and I'll do my best to answer them. I'm on my HOA board and have had lots of fun interfacing with HOA management companies and other board members. :)

Market Headlines

Supply continues to fall, though rather more slowly in the ranges above $200,000.
Demand is very strong below $100,000 but is weakening above $100,000.
Average sales price per sq. ft. is starting to look stronger below $100,000.
Pricing is stable or slightly weaker over $200,000 with $400,000 to $800,000 looking strongest.
A sharp deterioration in demand is now evident at the top end of the market.
Foreclosure activity is still declining and REO inventory falling, especially at the lower price levels

Foreclosures

New notices of foreclosure are running at their lowest level since 2007 and trustee sales are well down from the levels in March. We have fewer homes in foreclosure than at any time since the middle of 2008. Rumors abound that there is a new tidal wave of foreclosures coming. While I cannot comment on other parts of the county, in Phoenix I see no evidence to support that whatsoever.

Homes under $100,000

Demand extremely strong for the season while supply continues to fall. Prices are starting to climb.
Although sales were down 9% over the last month they remain slightly up over the quarter and are now 77% higher than this time last year.
This supply of distressed properties continues to gradually shift away from REO’s (down 13.8% in the last month) towards short sales and pre-foreclosures (down 7.6% and now 61.5% of active listings in this price range).
REO’s constitute 23.2% of the supply, but 62% of the sales in this sector.

Homes between $100,000 and $200,000

Supply down but demand is down too. Pricing has now remained stable for a full twelve months.
Supply has fallen another 6.1% in the past month and is down 21.1% when compared with April and 43.5% compared with July 2010.
Demand continues to decline, but sales are up 23% compared with last year while pending sales are up 4.6%.
Short sales and pre-foreclosures increased from 24% to 27% of sales.

Homes between $200,000 and $400,000

Demand fading although supply continues to decline. Pricing is slightly weaker.
The supply of single family homes priced between $200,000 and $400,000 dropped by another 4.3% between June 26 and July 26, and is now down 16% over the last three months and 32% over the last year.
Sales were down 15% month to month while pending sales dropped 6% between June 26 and July 26 and are now 16% below last quarter and 10.7% below last year.
Short sales gained market share rising from 19% to 25% of sales.

Homes between $400,000 and $800,000

Supply falling but demand weakening. Nevertheless sales prices are holding better than elsewhere.
Single family homes between $400,000 and $800,000 have experienced a 6.7% fall in active listings in the last month, 21% in the last quarter and 32% in the last year.
Months’ supply now stands at 5.2 months the same as June 26.
With prices gently rising and supply lower than at any time in the last several years, this sector remains in long slow recovery mode.

Homes over $800,000

Supply still declining but demand has weakened faster over two months. Sales prices are no longer rising.
The top end of the market is much weaker now than it was two months ago with demand sharply down.
The good news is that the supply of homes above $800,000 fell another 7.6% last month, 22% over three months and 30% since July 2010.
Active REO’s dropped from 45 to 43 over the last month and these represent 3% of total active listings.

All year long, my investor clients have been asking me to find them a great deal on a rental home in Phoenix. Well, here it is on a silver platter.

Check out this home: http://www.camilleswanson.com/featured/updated-home-in-ne-phoenix-with-pool-phoenix-az/

INVESTORS SEEKING DEALS FROM RENTAL INCOME: COMPARABLE PHOENIX HOMES RENT AS HIGH AS $1,000/MO.  IF PURCHASED AT LIST PRICE, THIS HOME CASH FLOWS POSITIVE WITH 10% DOWN SELLER FINANCING CONTACT ME IMMEDIATELY FOR DETAILS!! Assuming 5.5% interest (investor rates) after PITI (principle- $80,910, interest- 5.5%, taxes- $1,051/yr, LOW IN PHOENIX & insurance- $400/yr)

It’s never been a better time to be a landlord in Phoenix and rent your home.  Rental vacancy rates are at their lowest in years! I can show you the rental comps! This is a heck of a deal from a perspective of dollars and sense (yuck, yuck).  Please contact me ASAP for details!