by Paul Slaybaugh | Oct 25, 2010 | Home Buying
You have Scottsdale Real Estate questions.
We have answers.
Q: Is now a good time to buy a house in Scottsdale?
A: Forgive me for answering a question with a question. Do you need a house? The best time to buy a house is when you need one. Conditions are advantageous for buyers who can scrape up the requisite down payments and qualify for financing due to low interest rates and home values, but such external factors are irrelevant if you are not in the market for a new home. It’s probably a great time to buy a car right now, too, but are you going to rush right out and get one if your current vehicle serves your present needs? We agent types like to drum up business by urging consumers to act before a window of opportunity closes forever, but don’t let outside forces push you into a purchase based on fear or avarice. Likewise, don’t let extraneous market “noise” prohibit you from making the right purchase for your current needs. Obsessive market watching tends to lead to the dreaded “analysis paralysis,” which shackles a would-be buyer to indecisiveness. We all want to buy when the market is most conducive to securing a bargain, but such considerations must be in concert with, not mutually exclusive of, present need. Good and bad purchases are made every day.
Q: How much off the listing price should I offer?
A: Seeing that every sale involves a different seller, it’s a losing proposition to think in terms of a standard percentage of offer price to list price. Not only is the financial position of every seller unique, there is little with more emotional attachment than a home. Carve off an unrealistic amount in an initial offering, and you risk alienating the seller. You torpedo the negotiation before it even begins. Even when you remove emotion from the equation, such as with bank-owned property or short sales, the offer should be based upon value, not an arbitrary formula. For instance, if a bank-owned property is 100k undervalued in the list price, you can forget about knocking 10% off an already solid bargain. Consider yourself lucky if multiple suitors don’t show up to bid it up well over asking price. On the other hand, if a home is overpriced by 100k, offering 90% of list price likely means you would be overpaying considerably. Each property and its owner are unique, as should be the consideration that goes into the crafting of your offer.
Q: What’s all the fuss I keep hearing about appraisals?
A: Appraisals, and financing in general, comprise the soft underbelly of our slow-motion Real Estate recovery. The challenges start with the professional who is tasked with performance of the appraisal. New regulations were enacted to prevent fraudulent evaluations from artificially inflating home values, but we’ve traded one set of problems for another. These days the appraiser is essentially picked from a hat to prevent conflicts of interest. Unfortunately, this means that out of area appraisers of varying degrees of competence are often charged with evaluating homes in neighborhoods they have never previously worked. Further, as a designated “declining market,” even the home that closed across the street just last month is subject to a markdown in value to allow for depreciation in that short period of time since it closed escrow. Until we can overcome this stigma, home values will continue to be adjusted downward from the recent sales comps. Factor in the multiple appraisals that are often required for FHA financing on “flipped home” purchases (homes that sold within 90-120 days of the current transaction), and loan underwriters with the authority to review and reject the appraiser’s findings, and you get the minefield we have today.
Q: Should I pay off my credit cards to qualify for a loan?
A: Don’t even break wind without consulting your lender first. While I would hope that it is obvious that major purchases are off limits during loan qualification/processing (can affect debt to income ratios, credit scores, cash reserves, etc), many a home purchase has been derailed by the misguided good samaritanism of the borrower. You may need the good credit associated with the line that you aim to shut down or deplete required cash reserves that are necessary to gain full loan approval. Never assume that paying something down or off is beneficial to your unique financial profile without first consulting your mortgage professional.
Q: Should I bother with an inspection and final walk-through on an “as is” transaction?
A: The nature of an “as is” sale is one of the most fundamentally misunderstood concepts in Real Estate. Assuming that the purchase is made utilizing the standard Arizona Association of Realtors “As Is” addendum and the boiler plate language is not contradicted anywhere in the contract, all you are really agreeing to is the dismissal of seller warranties as to the condition of the property. You maintain full inspection rights with the option to walk away from the sale if condition is unsatisfactory. There is nothing that precludes you from requesting repairs at that point as well, the seller is simply not contractually bound to make any. As to the walk-through, it is important that you verify the property is still in substantially the same condition at closing as it was when the contract was signed. “As is” reflects the condition of the property at the time of the agreement. Any subsequent damage to the property is the responsibility of the seller. If the A/C has stopped working, or a tree fell on the roof, you likely have a case to demand repair or walk away from the sale.
Q: What am I actually looking for in a title report?
A: In short, you want to make sure the seller’s Uncle Willy from Topeka, who hasn’t been seen or heard from in forty years, doesn’t pop up after closing to claim an ownership interest in the property. Tax liens, mechanic’s liens, encroachments, easements, back HOA dues … you are basically looking for anything that can preclude your full rights to ownership and use of the property. I always pay special attention to the “Schedule B” of the preliminary title report that is furnished during the escrow period by the title company as it lists those items that will be exceptions to the title insurance policy. Gremlins that might pop up after closing, and will be outside of the scope of your title insurance coverage, typically hide here. With the abundance of short sales, foreclosures, tax sales, etc in our midst, the transference of clean title to a buyer has never been more rife with potential sabotage. If you are purchasing a bank-owned property, or really any property with recent changes in ownership, you want to make sure all encumbrances on the property have been or will be resolved in advance of settlement. Short sale buyers will need to know that the seller’s lienholders have, in fact, agreed to release the lien(s) on the property at closing. While these are functions of the chosen title company, they are not matters that can be taken for granted in 2010. All of those documents supplied by the title company during the escrow process that nobody used to read? Read them. If you aren’t sure which items are cause for concern, ask your agent. If your agent doesn’t know (or instill confidence in you that he does), contact a Real Estate attorney to review and advise.
Prevailing wisdom may label this a “buyer’s market,” but there are things roaming around out there in the haze. Biting things. Make sure you know what you are doing before stumbling out of the house, armed only with a pre-qual letter.
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Ray and Paul Slaybaugh are NOT attorneys. None of the opinions herein should be construed as legal advice. Should you have specific legal questions regarding the purchase or sale of Real property, contact a Real Estate Attorney.
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Have Scottsdale Real Estate questions? Send them to us through the contact form below. We’ll do our best to answer all in a timely fashion, and will use our favorites for future posts.
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by Paul Slaybaugh | Oct 9, 2010 | Home Selling, Scottsdale Real Estate
With the latest scuttlebutt in the housing industry centering around a rising political push for a large scale foreclosure moratorium by leading lending institutions, most are aware that Bank of America became the first to issue a temporary nationwide pause in foreclosures this past week. Though B of A is the first to stay their executions across all fifty states, JP Morgan Chase and GMAC agreed to halt foreclosures in the 23 states where foreclosure is a judicial process. The pressure to do so originated over procedural impropriety in several specific locales, and has snowballed into wholesale questioning of the internal processes of the major banks. Mounting concern over erroneous foreclosures spawned the voluntary cessation (expected to last several weeks). While Wells Fargo has spurned calls to do the same, it would not be surprising to see more institutions yield to the rising pressure and follow suit.
What does this mean? Plenty has already been written about this with homeowners facing foreclosure and prospective buyers in mind, so I won’t belabor those perspectives here. Suffice it to say that while any additional quality control that can prevent people from wrongly losing their homes to foreclosure would be a good thing, the upshot in terms of market reaction is likely to be a collective shrug of the shoulders. Not content to simply halt the actual act of foreclosure, B of A is temporarily taking their inventory off the market while the review is ongoing. It’s been posited that fewer listings will translate to a possible surge in prices, but this is pure mularky. The market simply does not react in a matter of a few weeks to any stimulus, as it takes time for consumers to make heads or tails out of new developments and how they translate to negotiable strength. On the contrary, I think this will make buyers who are already non-harried take even more of a wait and see approach. Rather than buying what is left, those who are not under a time crunch to get into a new house will probably just wait for the moratorium to end and for the withheld inventory to flood the market. In essence, we could be looking at an unintentional buying moratorium as well.
Though it would be foolish to anticipate a surge in values, the one segment of the consumptive spectrum that stands to gain from this turn of events is the non-distressed homeowner. With a small window opening for mom & pop home sellers to compete with significantly fewer bank homes for buyers, I would not be shocked at all to see a percentage gain of resale home sales while overall sales volume remains flat, or even declines slightly, in the coming weeks. I expect many buyers will choose to wait it out, but there are those who do not have the luxury of time. Be it a job relocation, family circumstances, etc, there are always buyers who need to buy now. With fewer distressed properties on the market, and likely buyer uncertainty over how this will translate to the short sale arena (will B of A process short sales while foreclosures are in limbo, or pause all such decisions? Will short sale sellers temporarily remove their homes from the market in anticipation of a reprieve?), this could be the traditional seller’s best opportunity to vie for buyers in quite some time.
Again, don’t misconstrue the knee-jerk hypothesis. The value of your home is not going to spike due to this temporary phenomenon, nor are you suddenly in the catbird’s seat. For those in an equitable position to sell, this window merely represents the best possibility to attract a buyer in months.
No screwing around – price your home right and get it sold while there are fewer alternatives for buyers. As a regular seller, with the tax credit gone as a buyer incentive and microscopically low interest rates and low prices not translating to appreciable gains in sales/values, you have to leverage every conceivable strength in this market to accomplish your goals.
Ready to sell your Scottsdale home? Contact us today to schedule a no-obligation consultation, but do it fast. When the moratorium ends and the holidays are fast approaching, it will be time to hunker down for another long, cold winter.
by Paul Slaybaugh | Sep 30, 2010 | Home Selling, Scottsdale Real Estate
Certainly, we are all aware that Real Estate fees are negotiable and that there is no set standard for the services of a REALTOR. Mind you, that does not mean agents are under any obligation to deviate from their stated rates, but it does mean that what Agent X quotes for his services is not to be mistaken for what Agents Y and Z might charge for theirs. That piece of legal housekeeping out of the way, there are means at your disposal for securing the best possible value on professional service from your agent. Follow this simple list of Do’s & Don’ts, compiled over the course of eleven years in the business, and you will give yourself the best chance at securing the lowest commission rate to go along with the level of service you demand.
Do:
- Refer me business. This one goes at the top of the list for a reason. In a commission based existence, new sources of business are my lifeblood. While it seems patently obvious, many simply don’t think about sending potential clients to their agent unless prompted. The primary reason that the fees in a Real Estate transaction tend to be high is the risk to the professionals involved. Mitigate some of the risk in an “eat what you kill” profession by helping me find my next paycheck, and I am more likely to reward the added security with a concession of my own.
- Provide me with repeat business. Unlike the wireless companies who are always offering deep discounts to new customers, I am far more likely to offer a lower rate to an existing client than the man off the street. As multiple transactions from a loyal client over the years will eliminate much of the reliance on cold business lead generation, we agents consider the client for life the holy grail of financial security.
- Be pleasant to work with. Touchy-feely as it sounds, no one likes working for a Napoleonic boss. I deal with all types in this business, but I’m more apt to offer a better rate to those I’m eager to assist than the rabid seller in the Hannibal Lecter mask.
- Do your homework. While I will inevitably have to help you unlearn a few things that you’ve gleaned from your internet sleuthing (amateur home evaluation via online calculator, anyone?), an educated client saves me time. That is additional time I can direct to procuring new business or coddling less prepared clients.
- Provide me with an excellent product to sell at my recommended list price. Some listings are simply creampuffs. Beautifully appointed and priced right, I know without a doubt that it is going to sell within 30 days on the market. While I will earn my keep in establishing value and marketing to fetch a top of market sales price, such creampuffs are the closest thing to money in the bank that this profession offers. I’m not adverse to reducing my normal fee if it means planting a sign in the yard of a home that will sell quickly and generate a ton of buyer calls (new potential business).
- Purchase with an eye towards future resale. This is an offshoot of the previous item. When looking for a new home, many buyers focus exclusively on their needs and budget. This is a mistake. Future value potential and desirability of the property across a broad spectrum of buyers is critical to not only your return on investment, but to its appeal to Real Estate agents as a listing sometime down the line. I won’t turn cartwheels when you call me to list a home for sale with a funky, unpermitted addition. A tough property to sell means no discounted rate.
See the pattern here? The idea is to give a little to get a little. Take away some of the financial risk associated with the job, and I can work with you on the reward. On the flip side, there are surefire ways to relegate yourself to the going rate. Avoid the following list of don’ts unless you enjoy talking yourself out of a deal.
Don’t:
- Ask me what I charge in advance of an initial consultation. It is human nature to want to cut to the chase, but lacking context, I have no idea whether your home is a creampuff or a dud. Further, demanding to know what I charge without giving me the opportunity to outline what services I provide for that fee raises a red flag. It sets an adversarial tone and tells me that you are likely going to be a grinder. Until you give me the opportunity to see the property, and/or you present me with a special circumstance that might make me amenable to a discounted offering, you are going to get quoted the standard fare. If anything, I might even quote a slightly higher fee than typical as I have no idea what I’m walking into.
- Haggle with me. There is certainly no harm in asking me about my fees (how could you agree to do business with me without knowing the costs, after all?), or asking if I would be willing to reduce them. Instead of trying to junkyard dog me into a lower rate, however, offer me something of value (see list of DO’s) in return. I don’t respond well to coercion, and I negotiate for a living. Give me a reason to reduce my rate, don’t blindly demand it.
- Own the only million dollar home in a $250k neighborhood. You must purchase and remodel/renovate shrewdly. Making poor initial purchasing decisions, over-improving for the neighborhood, or otherwise rendering your home difficult to sell is the single greatest saboteur of a better deal from me. Signing up for 6 months of marketing on an unsalable property will not put me in a generous mood. You’ll pay full boat, if I opt to take the listing at all.
- Play me off of other agents. It’s the oldest trick in the book, and one I can see coming a mile away. Fear of loss is a powerful motivator, just don’t be so obvious about it. A well-placed mention of the upcoming interview with another agent will work better than a full frontal assault of “Agent B said she’d list my house for ___%.” I know that I am likely competing for your business, and factor that into the rate I quote you. A subtle reminder won’t hurt, but a mugging will make me hold tight to my wallet.
- Approach me on one of my listings directly under the misguided belief that I will reduce my fee if you do not have representation. This bothers me on principle. I may offer a cooperating broker a percentage of my fee to produce a buyer, but under no circumstances does that percentage vanish or adjust if I am the only agent involved. I am actually hesitant to handle both sides of the transaction, as it opens the door to twice the transactional liability, and certainly will not double my workload for free. Regardless, this tactic is akin to cutting your nose off to spite your face. Go get yourself an agent of your own who will negotiate a better deal for you rather than dinking and dunking around with a percent or two of agent compensation. Think big picture.
- Ask me to reduce my fee if I find the buyer without the involvement of another agent. This is the flip side to the previous entry. Yes, I stand to earn a larger fee if there is no other agent involved in the transaction, but this approach is problematic in that you are essentially providing me with a disincentive to find your buyer myself. Why would I bust my behind and open myself up to the greater liability of handling both sides of the transaction for no additional reward? Such a commission arrangement essentially directs your agent to the couch, where he waits with feet up on the ottoman for a buyer’s agent to do his job.
I abhor the phrase “win-win.” So overused and misapplied to a business transaction. We are not Real Estate mediators, after all, but agents tasked with securing the best possible terms for our clients in the sale of real property. When it comes to the relationship between agent and client, however, it is the appropriate cliche. If we are to function as a cohesive unit to satisfy mutual goals, there are different routes to the “win-win” scenario. No need to butt heads when we each have things of value to offer in exchange for that which is most important to us. For consumers, that means making your agent’s job easier and directing future income potential his way. For agents, that means rewarding that consideration with quality, professional service at the lowest possible rate of compensation.
Symbiosis … it’s a beautiful thing.
by Paul Slaybaugh | Sep 23, 2010 | Promotions, Scottsdale Real Estate
Times were a buyer could reasonably anticipate that a seller would provide a one year home warranty policy with the sale of a home. Given the equity crunch that many are experiencing, and the prevalence of short sales and bank owned homes in the current market (which typically do not provide such policies), home warranties have gone the way of the buffalo as a throw-in to a Scottsdale home sale. With the lack of disclosures and repairs that accompany distressed property sales, however, such protection has never been more important. With that in mind, we are offering the following October promotions in addition to our always competitive rates.
For Buyers:
Free Home Warranty Policy – Register to utilize Paul Slaybaugh’s services as your buyer’s agent prior to 10/31/10 and receive a complimentary one year home warranty policy with your purchase at the close of escrow. See below for additional terms and limitations.
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For Sellers:
Free Home Warranty Policy For Your Buyer – Want to stand out from the competition by offering a home warranty policy to potential buyers? I understand the equity pinch may not make such overtures possible. Let me do it on your behalf. Register to list your home for sale with Paul Slaybaugh prior to 10/31/10, and I will provide your buyer with a complimentary one year home warranty policy at the close of escrow. See below for additional terms and limitations.
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Additional Terms: Promotion valid with website registrations prior to October 31, 2010 only. Close of escrow must occur prior to 10/1/11 for offer to remain valid. Promotion is offered exclusively and may not be combined with any other offer. Maximum value of $325 per policy. Not responsible for cost of additional coverage over and above $325. Not redeemable for cash value. Utilize registration form below to qualify.
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by Paul Slaybaugh | Sep 22, 2010 | Home Selling, Scottsdale Real Estate
Note: The following is the opinion of Paul Slaybaugh only, and, therefore, patently correct.
Unless you are trying to get under a specific price barrier, you are better off leaving your asking price alone than making a minuscule reduction.
Sounds contrary to logic, doesn’t it? And contrary to the groveling we agents typically employ to wrangle an unrealistic seller into the wakeful world. Why on earth would the guy who has been hammering you on price from the listing’s inception reverse course now that you are willing to acquiesce slightly?
Because a 5k price adjustment to a property that needs to come down 50k sends a signal to buyers, and not the one you think it does. Assuming I did not hit the hooch prior to the initial listing consultation and abet your decision to list the house for $404,900 (thus making it entirely likely that the eventual buyer for your house is not currently seeing it due to his searches being constrained by a 400k ceiling), such insignificant tinkering with the price essentially puts buyers and their agents on notice that you are not all that open to negotiation. Shaving a few measly bucks off the list price is equal parts admission that the current pricing isn’t getting it done, and revelation of an unwillingness to give up on the sales price targeted.
That’s a sales molotov cocktail.
If you move your listing price from $425,000 to $419,000, everyone and their mother knows you are still looking to command upwards of 400k.
Perhaps this is the message you hope to impart, but it makes you appear even more recalcitrant than you did prior to showing the modest reduction. Of the two primary goals of price adjustment – attracting a new group of buyers, and re-energizing those who have already seen the home – you accomplish neither. Adjustment for the sake of adjustment isn’t going to fool anyone and should not be prescribed haphazardly. It is just going to perpetuate the belief that, even upon further reflection, your opinion of value is not compatible with reality.
Many times buyers and their agents will put a home on the watch list if it appears to fit their needs, but is overpriced. That very first price reduction goes a long way in their determination as to whether your home is to be a viable contender. If you show a meager concession after 90 days on the market, they will intuit that you will not be open to an offer more in line with current values. Further, at the current rate of adjustment, it will take another 2 years for you to eventually work your way down to where you need to be. Adios muchachos, it’s on to the next contender for them.
If you really have no flexibility to drop your price, you are better served to keep them guessing as to your motivations and likely openness to negotiation. Better to show nothing than to show you are thinking about haggling in cents when the buyer is thinking in dollars.
If you need to reduce your price to break into the appropriate buyer demographic, bite the faux-equity bullet and do it. Doing so piecemeal not only alerts potential buyers to your likely miserly approach to negotiations, but robs you of the impact an appreciable change brings.
I know you don’t want to give your home away, and I would be derelict in my duty to let you do so. Just bear in mind that you cannot give away that which you don’t have. If your list price does not reflect current market value, you are fretting about closing the door on money that was never yours.
If you need to make a price adjustment, make it count.
