Here in Arizona, after years of rapid growth, we were one of the first real estate markets to tank when the real estate bubble burst. The good news is that we are also evolving into one of the first real estate markets to recover. Though the recovery is slow, it appears to be steadily improving and moving in a positive direction. This is good news for just about everyone. It is not simply realtors who were affected by the downturn. There are multiple industries that depend on real estate for their lively hood. Aside from those more directly connected to a real estate transaction such as inspectors, appraisers and title companies; there are multiple other industries that have suffered with the real estate downturn – movers/moving companies, furniture stores, small businesses, construction, manufacturing and more. In one way or anther, we were all affected by the slumping market.

So what is in store for 2012? Our local Phoenix metro area real estate inventory significantly declined in 2011. We enter 2012 with half of the volume that we started with in 2011. The foreclosure market has also been greatly reduced. The forecast is that Arizona no longer has a large potential glut of future foreclosures looming over its housing market like other states. Short sales will remain with us for the foreseeable future, but banks/lenders are committed to work more efficiently with the short sale properties. They are recognizing that the short sale minimizes the overall loss on a property. A short sale property also tends to be in better condition and sells at a higher sales price than a foreclosure. The increased sale price is positive for the eventual market recovery. Banks have vastly improved their methods/regulations and have been approving a record number of short sales.

The fear that paralyzed the real estate industry is slowly being replaced by rising optimism that real estate is a good investment again. The American dream of home ownership has never totally departed. Most of the so called real estate ‘gurus’ all are forecasting a brighter future.

Here are some of the predictions:

• ‘Arizona’s real estate market, will continue its “agonizingly slow recovery” in 2012, which is likely to be better than 2011’ said Pollack president of real estate consulting firm Elliott D. Pollack and Company.
• “Although the Arizona recovery is tepid at best, every key indicator is expected to be improved in 2012 compared to 2011, including jobs (up 1.8 percent), incomes (up 6 percent), and retail sales (up 8 percent). But no indicator will be sharply better until the national economy moves onto a faster growth path.” said Lee McPheters , director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business.
• CNN Money magazine predicts – Across the US, median home prices are expected to fall another 3.6% by the end of June, 2012.
• Michael Orr, Analyst and Author of The Cromford Report, comments “The idea that average Phoenix home prices are falling is a myth. The price bottom occurred on September 15, 2011. For three months now home prices have been on a strong and clear upward trend.”
• Local homebuilder executives and analysts agree there are reasons to expect a better year in 2012 . They said there already have been improvements in some key market fundamentals during the past few months that have given homebuilders a reason to hope.
• The National Association of Realtors (NAR) predicts that 2012 will be one of the best years on record for housing affordability.

Where is the Arizona Real Estate market headed in 2012? Overall, the market is improving. One of the most promising changes in the housing market since early 2011 has been the drastic reduction in the number of existing homes available to purchase in metro Phoenix Good homes, priced right are selling quickly and this will continue into the future. The real estate outlook for 2012 is optimistic!

No matter what town you are living in or where you want to move, the home buying and selling market will be swinging toward one of two directions. Either it will be in a buyers’ market or a sellers’ market, or sometimes, a little of both.

Most real estate practitioners consider a typical market to be one in which homes take an average of six months to sell. REALTORS® keep track of this number by keeping up with the days on the market (DOM) of every home listed and sold. That means that in the MLS, there are likely to be at least six months worth of inventory (homes) on hand to sell for the number of buyers in the market. If the number rises above six months inventory on hand, then the market is swinging into a buyer’s market. If it falls below, it is becoming a seller’s market.

A buyer’s market is one in which there are too many homes on the market for the number of buyers. Homes take longer to sell and prices fall.

Sometimes buyers believe that winter time is a buyers’ market. Although it is true that there are fewer buyers, there are usually a compensating fewer homes on the market as well. Homes offered for sale during slower times of the year are generally aggressively marketed, and may not sell for a significantly lower price than they would if they were marketed in a busier period.

In the spring, a seasonal adjustment occurs, and more homes come on the market. Buyer activity picks up as families with children (still the single largest buyer demographic) buy homes so they can move during summer vacation. A buyers’ market can easily exist in the spring, if conditions dictate – that there are more homes than buyers, falling prices, and longer DOMs.

Sometimes a buyers’ market can be created that lasts for a long time. The exit of one or more major employers from a community, a natural disaster such as a flood or earthquake, or some other catastrophic event can affect home values in an area for years.

Seasonal or not, any time there are more than six months’ inventory on hand, there is a glut of homes on the market. Whenever there is a surplus of homes, and prices begin to drop, sellers will work harder to attract buyers, including adding incentives such as owner-financing or a large “redecorating allowance.”

As homes become more competitive, buyers realize that their interest is at a premium and they will increase their demands to sellers. Those nice chandeliers that normally would not be included in the purchase price of the home, now become a bargaining chip for the buyer. The buyer may ask the seller to provide a home warranty at the seller’s expense, or for the seller to pay more of the closing costs than usual out of the settlement proceeds, or any number of other contingencies.

People who have occupied their homes for many years may be able to sell their homes at a profit in a buyer’s market because they have built equity, but they will find that if they have performed little or no improvements the home will compare even more poorly with the glut of homes on the market and it will command bottom dollar.

Sellers who are in a must-sell position may take little or no profit from the sale of their homes, or may even be forced to take a loss. The homeowners who are most hurt by a buyer’s market are those with little or no equity built into the home. If they are forced to sell, they may have to come to the closing table with cash to pay their mortgage off or allow the home to be repossessed by the lender.

The one certainty that can always be counted upon is that one side of the market will never stay on top forever. In fact, it can turn on a dime. The same area that remains depressed for a period of time can make a comeback as lower prices stimulate reinvestment.

Ask your buyer’s agentto find out the bank’s purchase price on the Trustee’s Deed or Sheriff’s Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.

Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.

2) Determine Comparable Sales for the REO Foreclosure

In many cases, the list price has little bearing on the value of the home. The market value carries the most weight. If you are up against competing offers, other buyers will offer more than list price.

• Look at the last three months of comparable sales, a mini CMA,for that neighborhood to determine how much this REO foreclosure is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition. 
• Look at the pending sales. Ask your agent to call the listing agentsof those pending sales to try to find out the accepted offer price. Some will share that information and some will not. 
• Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.

3) Analyze Listing Agent’s REO Solds

Most REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.

• Ask your buyer’s agent to look up the listing agent in MLS. 
• Run a search using that listing agent’s name to find the last three to six months of that agent’s listings. 
• Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.

4) Ask About Number of Offers Received for that REO Foreclosure

If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.

If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.

5) Submit Preapproval Letter

It goes without saying that you do not want a prequal letter. You want a preapproval letter. Get preapproved from your choice of lender in advance.

Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don’t trust other lender preapprovals but trust their own departments.

6) Don’t Ask the REO Bank to Pay for Repairs / Inspections

Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted.

7) Shorten the Inspection Period

If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.

8) Offer to Split Fees wit the REO bank

Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow fees.

Many banks negotiate discount fees for title insurance. If the bank will pay for the owner’s policy, the ALTA policy might cost a bit more. But it’s still a good idea to let the bank choose title if you want your offer accepted.

 1. Make sure you are selling at the right price I know it’s very difficult to sell your home for less than what you bought it for a few years ago. It’s even harder if you’re upside down on your home loan. But you can’t insist on unrealistic price if you want to sell your home in a down market. To find the right price, you can check other homes for sale in your area. Although you can’t compete with banks that are selling foreclosed homes, you’ll be in a much better position to compete against other sellers who aren’t as flexible on price.

 2. Remove clutter from your home Photo by Annahape via FlickrNo one wants to buy a messy rat hole. So make sure your house is clean and organized. Remove as much clutter as you can, even if you have to store your stuff in storage. You can get an idea of how your home should look by browsing through magazines or even IKEA catalog. And here are some general tips to help guide you: ■Tables, desks, and countertops should be mostly clear to show as much surface space as possible. ■Remove family photos from walls, shelves, and fireplace mantle (if you have one). You want the potential buyers to picture themselves living in the house, not looking at your family history. ■Remove any unnecessary furniture and put it into storage to give your house more living space. ■Remove unnecessary electronics, extension cords, and power strips. Most buyers don’t care about your mega entertainment system. And you don’t want it to be obvious that your electrical system is old and lacking. ■Remove clothing from your closets and put it into storage to make the closets feel bigger. ■Remove all the extra clutter throughout the house to make it feel bigger and more spacious.

 3. Improve your home curb appeal  First impression means a lot, and for your home the name of the game is curb appeal. If you’re a fan of HGTV Curb Appeal, you’ll know exactly what I mean. The goal here is not to spend a lot of money to improve your home, rather you’re trying to do inexpensive things (that may require some sweat equity) to improve the appearance of your home. You want your home to look better than other houses in the area and in a “move in ready” condition. Here are a few things you could do to improve your home curb appeal: ■Trim hedges and mow your lawn. ■Clean all windows and surfaces. ■Repaint walls, doors, and trims in neutral colors. ■Replace old window blinds or drapes, and update the window treatments. ■Power wash or paint the exterior.

4. Fix problems around the house Now go throughout the house room by room, and take notes of all the things that need fixing. Little things matter and they could turnoff your buyers. If you noticed them, the buyer will too. Take the time to go around and fix those things one by one. Remember that fixing these small problems doesn’t have to be expensive, but it will take time and effort.

 5. Learn the Art of Home Staging staging is not decluttering and cleaning. Home staging goes beyond that and happens after the steps above. It involves much less tangible things that include: ■Making the home smells fresh and airy. Some will even go as far as baking cookies before a showing to give the house a pleasant aroma. ■Making sure the temperature is right. You want the potential buyer to feel comfortable. ■Making sure rooms are properly lit by adjusting the window treatments and turning on/off lights. ■Arranging pieces of furniture in an appealing manner. ■Putting vases of fresh flowers on tables, or a small fruit basket on the dinning table. ■Showcasing various fabrics, decors, and knickknacks. ■Arranging items on shelves, bookcases and fireplace mantels to draw attention to predetermined areas. You can read more about home staging at: Home Staging & Staging a House – What is Home Staging.

6. Leverage the power of the web to market your house This is the Internet age and you should not let your agent limits your reach. Leverage online venues to help sell your house.

7. Get a good agent to help you sell In general, it’s better to work with an agent than trying to sell the house on your own. It’s their full time job to find buyers and show your home. This is harder than it looks and it’s generally better to leave this to the pro. However, you have to remember you’re the boss and that we are dealing with a lot of money here. So don’t just pick any agent that comes along. Call several real estate offices and ask to talk to their top sales agents. Make sure you are comfortable working with the person and ask questions. Here are some good questions you can ask your real estate agent. Another important thing to remember is never go into an exclusive contract with your agent. You want to be able to fire your real estate agent if he or she sucks. Here are some thoughts on how to find a realtor to sell your house.

 8. Be creative This is a buyer’s market, but even so, a house is still very expensive for most people. If you have a buyer that needs help to close the deal, consider offering some sort of incentives to make the deal happens. For example, you can offer to cover some parts of the closing costs. This works especially well with first time home buyers. Be creative!

9. Don’t be there When you are having an open house, leave the house. It’s uncomfortable for you to have strangers in your home, and likewise, it’s uncomfortable to be in other people’s home. So why create any more tension? Leave the house and let your real estate agent takes care of business. Let your buyers look around at their leisure without your scrutiny.

• Answer: A home
  is an investment. When you rent, you write your monthly check and that money is
  gone forever. But when you own your home, you can deduct the cost of your
  mortgage loan interest from your federal income taxes, and usually from your
  state taxes. This will save you a lot each year, because the interest you pay
  will make up most of your monthly payment for most of the years of your
  mortgage. You can also deduct the property taxes you pay as a homeowner. In
  addition, the value of your home may go up over the years. Finally, you’ll enjoy
  having something that’s all yours – a home where your own personal style will
  tell the world who you are.

Homebuyers pumped up the volume in the third quarter of 2011 but only a few areas of the country made any noise when it came to an increase in selling price.

With mortgage rates at record lows and a drastic reduction in home prices the past few years, many potential buyers on the fence appear to be reconciled to the current conditions and are making a move on houses in some locations.

“I think the economy has been down long enough that people know where it is, and if they have the money to do something, they realize that the pricing’s not bad and that now is the time they should act,” said Lou Ulery, a real estate agent who works the West Palm Beach and Delray Beach areas of Florida. “The pricing hasn’t gone up much but there are more sales.”

Ulery, one of several HouseHunt agents surveyed about third-quarter conditions, said that his area of Florida attracts investors and people looking for second homes. He added that the average time a house remains listed on the market is between four and five months.

“The ones that are priced well go a little quicker,” he said. “It’s going to take a while for things to really turn around, but the higher-priced homes seem to have hit the bottom about a year ago. A lot of the more expensive homes are definitely on the way back up.”

Regarding inventory, 68 percent reported a good supply, a decrease of 14 percent from the second quarter. The large jump likely signals an increase in activity and the probability that banks aren’t releasing a backlog of foreclosed houses onto the market.

“There is a strong demand for properties that can actually be bought,” said Mike Hoke, a real estate agent with an office in Riverside, CA. “We’re getting close to 100 percent of the asking price, and in some cases a bit more. Prices are down 5 percent on average from a year ago, but the activity level of good, well-priced homes in good condition that you can actually buy is probably up.”

Hoke said that some REOs or equity sales are on the market less than 30 days but that most short sales “take forever.” He said one recent buyer had to go through four lenders before a sale could get done, leading him to surmise that an uptick in the overall mood of the country and less-stringent barriers to loans is needed to get the housing market rising on a steady path.

“Buyers are increasingly nervous and lenders are increasingly a major problem when it comes to getting deals done,” Hoke said. “Many buyers are sitting on the sidelines to see if prices will go down even further, and some are there because of the lending process. Something needs to break loose.”

Activity in the Phoenix metropolitan area appears to be doing that despite Arizona’s poor showing in almost all national housing statistics.

“Low interest rates and people sensing that we’re near the bottom of the crisis” has resulted in the “biggest sales surge since 2005,” said Kevin Houston, a real estate agent in Phoenix whose office concentrates on eastern cities of the region such as Tempe and Chandler. “Since March, sales are up quite a bit on properly priced properties, and we’re usually getting multiple offers on them.”

Houston described his mood as “cautiously optimistic,” but any hint of good news is tempered by banks continuing to hold back a lot of properties. He said a recent report revealed that Maricopa County had 276,000 vacant homes, most of them likely stalled in the foreclosure process.

“It looks like we have a shadow inventory that’s pretty large,” Houston said. “I think banks and lenders are stringing them in because they don’t want to flood the market.”

In northern Virginia, agent Leslie Woods-Hulse reported that volume dollar sales were up 23 percent in September from the month before and 7.6 percent from a year ago, with the total number of closed properties also up 23 percent from August and 13 percent from a year ago. The average sold price of a home and the closing price versus the asking price are virtually unchanged, however. The similar numbers are likely a combination of a stalled economy and the fact that a lot of sellers aren’t overpricing their homes anymore.

“The sellers are becoming more aware of what to list their particular homes for, so the list price to sale price is much better than it used to be,” Woods-Hulse said. “Also, the appraisers, who have gone through some pretty stiff scrutinizing to do their jobs, are appraising the properties at for what they’re really worth in today’s market.”

Hulse-Woods, who doesn’t see the housing market leveling off until at least 2013, sees glimmers of hope moving ahead.

“There are investors coming out of the woodwork to buy properties, which should help absorb properties back into the market,” she said. “Hopefully that will get real buyers back into the market as opposed to all of the flippers we saw a few years ago. That in itself is doing a tremendous amount for the industry and getting us into more of a level playing ground. But it has been a trip.”

 REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. You see, most foreclosure auctions do not even result in bids. After all, if there was enough equity in the property to satisfy the loan, the owner would have probably sold the property and paid off the bank. That is why the property ends up at a foreclosure or trustee sale.

Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney’s fees and any costs association with the foreclosure process. In order to bid at a foreclosure auction, you must have a cashier’s check in your hand for the full amount of your bid. If you are the successful bidder, you receive the property in “as is” condition, which may include someone still living in the property. There may also be other liens against the property.

Since what is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. Then the property “reverts” to the bank. It becomes an REO, or “real estate owned” property.

REO FOR SALE

The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS for removal of tax liens and pay off any homeowner’s association dues. As a purchaser of an REO property, the buyer will receive a title insurance policy and the opportunity to investigate the property.

A bank owned property might not be a great bargain. Do your homework before making an offer. Make sure that the price you pay (if you’re successful) is comparable to other homes in the neighborhood. Consider the costs of renovation, including time to complete them. Don’t get caught up in a ‘bidding war’ and pay over market value. It’s an old myth that “foreclosures” are a bargain.

HOW NAks Sell Them

Each bank/lender works a little differently, but they all have similar goals. They want to get the best price possible and have no interest in “dumping” real estate cheaply. Generally, banks have an entire department set up to manage their REO inventory.

Once you make an offer to purchase, banks generally present a “counter-offer.” It may be at a higher price than you expect, but they have to demonstrate to investors, shareholders and auditors that they attempted to get the highest price possible. You should plan to counter the counter-offer.

Your offer or counter-offer will probably have to be reviewed and approved by several individuals and companies. Even once an offer is accepted, the bank may insert wording like “..subject to corporate approval with 5 days.”

Conditions

Banks always want to sell a property in “as is” condition. Most will provide a Section 1 pest certification, but not unless you include it in your offer and negotiate the point. They will allow you to get all the inspections you want (at your expense), but they may not agree to do any repairs.

Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct.

Even though you agreed to “as is,” always give the bank another opportunity to make repairs or give you a credit after you’ve completed your inspections. Sometimes they’ll re-negotiate to save the transaction instead of putting the property back on the market, but don’t take it for granted.

Most banks will not provide financing on their REOs but it doesn’t hurt to ask. Especially if the property has extensive damage and you are purchasing it “as is.”

The Basics of a Short Sale

Banks grant short sales for 2 reasons: the seller has a hardship, and the seller owes more on the mortgage than the home is worth.

A few examples of a hardship are:

• Unemployment / reduced income
• Divorce
• Medical emergency
• Job transfer out of town
• Bankruptcy
• Death

The seller will need to prepare a financial package for submission to the short sale bank. Each bank has its own guidelines but — with the exception of Wachovia, which is the best short sale bank in the world — the basic procedure is similar from bank to bank. The seller’s short sale package will most likely consist of:

• Letter of authorization, which lets your agent speak to the bank.
• HUD-1 or preliminary net sheet
• Completed financial statement
• Seller’s hardship letter
• 2 years of tax returns
• 2 years of W-2s
• Recent payroll stubs
• Last 2 months of bank statements
• Comparative market analysis or list of recent comparable sales

The Short Sale Process at the Bank

Buyers may wait a very long time to get a response from the bank. It is imperative for the listing agent to regularly call the bank and keep careful notes of the short sale process. Buyers may get so tired of waiting for short sale appoval lthat they may feel the need to threaten to cancel if they don’t get an answer within a specified time period.

That type of attitude is self-defeating and will not speed up the short sale process. If buyers are the type with little patience, perhaps a short sale is not for them.

Following is a typical short sale process at the bank:

• Bank acknowledges receipt of the file. This can take 10 days to a month.
• A negotiator is assigned. This can take 30 to 60 days.
• A BPO is ordered. The bank probably will refuse to share the results of the BPO.
• A second negotiator may be assigned. This can take another 30 days.
• The file is sent for review or to the PSA. This can take 2 weeks to 30 days.
• The bank may then request that all parties sign an Arm’s-Length Affidavit.
• The bank issues a short sale approval letter.
• The buyer cancels.

I threw in that last line because sometimes I have to sell my Sacramento short sales 3 or 4 times before a buyer sticks with the transaction. Buyers get angry and annoyed because the short sale process can be so lengthy that they sometimes cancel without telling anybody. Some short sales get approval in 6 to 8 weeks. Others take 90 to 120 days, on average. To find more about short sale click  Short Sale Help

REO stands for real estate owned, which means that REO properties are owned by a bank, credit union or another type of lender. In other words, they’re foreclosed homes. Buying an REO is a great way to get a low price on a property, but there are important factors to keep in mind when making an offer on an REO property.

First of all, don’t assume that a property is competitively priced just because it’s an REO. Have your agent do some research when buying a foreclosure. Look at the previous buyer’s purchase price and compare it to other homes in the area and what the bank is asking for.

When you make an offer on a standard home, you’ll usually offer 2-3% less than the listed price. This isn’t the case when buying a foreclosure. Banks often get multiple offers on REO properties, so look at the selling agent’s history to see where homes are selling in relation to their listed prices. You’ll often need to pay 5% or more over the list price for the home, which will still be a fantastic deal. However, you’ll also need an appraisal that correlates to your offer price, so keep this in mind.

Of course, offer prices will vary from home to home, so once again you’ll have to depend on your real estate agent to do some research. Some foreclosures actually sell for less than their listed prices, but don’t expect the bank to handle repairs or other costs if you’re buying a foreclosure for less than list.

To make your offer more attractive when buying an REO, get a preapproval letter from the lender of your choice. Banks are more worried about preapprovals than standard sellers, so this is an absolute must. You can also offer a short inspection period and take on some of the closing costs. When buying a foreclosure, remember that the bank is trying to get rid of the property quickly and at the best possible value. If you’re able to understand their needs, you’ll often end up buying a home at a great low price.