by MICHAEL BODEEN | Dec 29, 2014 | Bodeen Team Blog, Buying a Home, Real Estate News, Selling a Home
Many buyers, especially first time homebuyers can get very uptight about buying a home, indeed, both buying and selling a home is stressful. I’ve heard it said that the degree of stress that buyers and sellers go through during the home buying/selling process is akin to the stress of losing a spouse. Now, that doesn’t mean that the two are related in terms of importance, but only how the human body metabolically responds to the stress.
Well, we can’t prevent clients from not having stress, but I will say that Arizona’s purchase contracts, which are decades in its evolutionary process, go a long way toward alleviating the stress load and in fact may be the very best consumer-centric real estate contract in all 50 states. Having worked in California for 18 years and using their forms, and then coming to Arizona, there is no comparison in terms of “User Friendliness.” In California, for example, we were told we could not explain to clients what a given clause meant as that would be practicing law, for which we are not licensed. The problem was in the legalese, the lack of clarity.
In Arizona our forms are crafted to be understood. Every few years a large, select group of industry officials including brokers, lenders, contractors, termite and home inspectors, Department of Real Estate, lawyers, to name just a few, meet to see which clauses are working and which aren’t. As Realtors, we have the chance to give our two cents worth prior to the group meeting. Out-dated stuff gets tossed, new legislation gets integrated, and best practices are utilized. I sadly contend that if a consumer will take one to two hours to carefully read our contracts, they might know as much (or more) than their agent about the agreement.
Perhaps the greatest tool in the hands of buyers, sellers, and Realtors, is the “Buyer Advisory” put out by the Arizona Association of Realtors. This contains links to virtually every aspect of house buying in Arizona. To view this form, go to: http://www.aaronline.com/wp-content/uploads/sample-forms/BuyerAdvisory.pdf
On top of the Buyer Advisory, we have our
“10 day Due Diligence”
period (aka inspection period). This is one of the most critical and valuable parts of the home buying process. For buyers, it’s the best opportunity to find out pretty much everything there is to know about the home they’re buying. If a buyer, in their 10 Day Due Diligence, determine there is something that they don’t like, they can withdraw from the agreement without forfeiture of deposit. Does the request need to be reasonable? Used to, but now it’s strictly up to the subjective opinion of the buyer. This takes the pressure off.
But what about the seller, how does it benefit them? It greatly benefits the seller. I feel it goes a long way to reducing ye old “Buyer Remorse.” If buyer, seller, Realtor all understand that the buyer pretty much has a ten day “free look” then once the buyer has gone past this period, they are “locked” into the deal with the exception of a financing contingency. If they back out during the first 10 days, it’s only 10 days, and then we can get the property back on the market. This means that following that 10 days, everyone can pretty much expect smooth sailing to closing.
(…and if you’ll buy that…)
by MICHAEL BODEEN | Dec 22, 2014 | Bodeen Team Blog, Real Estate News
Just in time for Christmas we have good news gifts for buyers, sellers and homeowners!
For Sellers, it’s looking much more positive thatpricing will start moving up in the next 6 months.Why? Well, everything we’re hearing lately seems to be all good news for housing, locally and nationally! Buyers take note, there has seldom been as good a time to buy as right now. Yes that sounds very “used car-like” but I would be remiss if I didn’t get the word out to you while you can still get such an incredible combination of market conditions which favor you.
The big gift this year is that the economy is starting to rock! Gas prices have plummeted which can only be good news for business and consumers as inflation is held in check. This should be an encouragement for more hiring throughout the economy creating greater consumer confidence. When consumers are confident, consumers buy! The stock market is currently giddy with the continued bull market run. This is having the affect of bolstering consumer confidence and increasing personal wealth.
Another big gift to 2015 Sellers and Buyers is that the local housing market will benefit from the release of more buyers who had been in the foreclosure and short sale “penalty box” not being able to buy as a result of a completed short sale or foreclosure.
For buyers, the “Millennials” are finally going to “get it” this next year and embrace the gift of affordable housing. Believe it or not, they will start buying homes again. Parents that could mean an extra room or two in the house, lower food and utility costs. As rentals remained tight, the average rent price increased 5% this past year. And with mortgage rates starting to dip below 4%, even they will realize what a gift this is.
New: First time homebuyers (only one needs to be a first time buyer) can now obtain a new mortgage for 3% cash down payment and up to $417,000. Do you realize that a 30 year fixed rate mortgage for $300,000 is a monthly payment (Principle and Interest or P&I) of $1432 (plus taxes and insurance)? And remember millennials, we still have the mortgage interest deduction which could effectively lower your monthly payments on that $300,000 by $240 per month, making that monthly payment of P&I under $1200!
Even the government has gotten into the gift giving mode as well. Just this past week, Congress, via a bill known as the Tax Increase Prevention Act of 2014, passed both houses of congress, and extended the Mortgage Debt Relief Act through the end of this year. If you recall, this Act had not been extended in 2013 which left many folks who recently completed a short sale wondering if IRS was going to tax them for “debt relief.” That’s now been settled through this year. The Act also allows a tax deduction for pre-paid mortgage insurance premiums if a buyer of a home in 2014 paid this. This is especially common for the FHA buyer. The bill provides for a retroactive one-year extension which expires on December 30th of this year and would be effective for those filing 2014 returns this year.
So folks, 2015 has the promise of being a wonderful gift for buyers and sellers. Are you ready? If so, let us know!
We wish you a Merry Christmas and terrific holidays for all of you!
by MICHAEL BODEEN | Dec 15, 2014 | Bodeen Team Blog, Buying a Home, Real Estate News
This past week, Fannie Mae announced a new loan product which is designed to help first time home buyers buy more home with less money. Does this ring a bell to anybody out there?
The new loan product is not really new however. It first made its’ debut in the early to mid 2000’s and was a precursor to what I like to call the “fogamere” mortgages. You remember, those loans in which anybody who could “fog a mirror” could qualify for a loan? This product however should not be compared with those (not yet anyway). With this loan, the buyer needs only a measly 3% as a cash down payment. That’s less than FHA’s 3.5% requirement! Some other parameters:
1) Only one of the borrowers needs to be a first time home-buyer
2) Fixed rate mortgage 30 years or less
3) Mortgage Insurance applies if loan to value exceeds 80% (This is required on FHA loans also)
4) Minimum Fico Score of 620 (similar to FHA standards)
Now this sounds as good as or better than an FHA loan, but is it? Well, in my opinion yes, because it partially plugs a lending gap that developed in January of 2014 when FHA reduced their maximum loans in Maricopa County to $271,050. Since that time buyers over that price range who could not put up the money for larger down payments did not have many options.
Before that happened FHA would loan up to $346,250, which on top of their 3.5% down payment would enable that borrower to qualify for a home near $360,000. So if you were a seller who had a home valued at between say $280,000 and $360,000 this year, you lost a large pool of prospective buyers for your home because they didn’t have low down payment financing.
The largest benefit of this new low down payment financing will be a resurgence in the 280k+ market, which had been suffering this year.
The other major benefit is the 620 FICO score that would seem to make this every bit as borrower friendly as an FHA loan.
So, the necessary caution between this loan and “fogamere” loans is to not go where the lenders went before, by offering high risk mortgages. These include zero down payment loans, piggy back loans (two loans totaling 100% but eliminating mortgage insurance which are back again), and then “cash back” lines of credit where the moment you close on your house loan, a $50,000 to $100,000 line of credit (or more) was immediately placed on your home for you to use for any purpose. This revved up the market so much that prices began soaring until…it was too late. Hence the crash.
My question is, “Why not make this loan available to all borrowers rather than just NEW home-buyers?”
This would further help an entire price range of homes that will move the economy further forward. Just keep the “fogameres” away
by MICHAEL BODEEN | Dec 8, 2014 | Bodeen Team Blog, Real Estate News, Selling a Home
TEMPE RANKS AS ONE OF THE BEST COLLEGE TOWNS for students and permanent residents alike, based in part on:
- Livability
- jobs
- housing affordability
- availability of rental units
- walkability
The ranking was completed by www.livability.com, which states that Tempe offers a big city experience while still maintaining a small town feel. The study further noted that Tempe has a diverse economy, major university, vast shopping opportunities, excellent recreation facilities, great local transportation, including a good “walk Score,” warm sunny days and, I will add, PAC 12 ASU Sun Devil football and basketball.
PENT UP DEMAND FOR ACTIVE ADULT COMMUNITIES? Homebuilder confidence in the market for homes aimed at buyers over the age of 55 rose in the second quarter – its highest 2nd quarter reading in 6 years. According to the National Association of Builders chief economist, David Crowe, “The slow but steady increase in existing home sales” is one of the factors of this optimism.
As more and more of the over-55 crowd is able to sell their homes for better prices, many are looking to the active adult communities for their next move.
IT’S ALL ABOUT THE KITCHEN STUPID! What ranks as the most important feature for buyers considering a “new” home? Well no surprise here, but according to the PulteGroup Home Index Survey, 30% of Americans say they consider the kitchen to be the most important area when choosing a new home. And considering the phenomenal popularity of cable TV home and cooking shows in the past 5 years, it looks like this trend will only move upwards.
Surprising to me anyway, is that the master bedroom is ranked the 2nd area of importance by 22% of the new home buyers. In personal experience of showing buyers homes, the “Great Room” seemed to be almost as important as the kitchen.
HOMEOWNERSHIP DECLINING The U.S. homeownership rate declined for the ninth year in a row in 2012-2013 according to the Joint Center for Housing Studies of Harvard University. The number of homeowner households also fell for the 7th straight year with a drop of 76,000. Homeownership rates, per the study, for ages 25-54 are at their lowest rates since 1976.
These declines are the smallest reported since 2008 suggesting that the bottom may be in sight. Without question, our great recession, spurred on by the housing debacle of 2007-2009, was the main culprit as more folks lost homes or walked away and turned toward renting or living with relatives. As the numbers turn, homeownership will again head upwards in a big way.
by MICHAEL BODEEN | Nov 18, 2014 | Bodeen Team Blog, Real Estate News
In the early 90’s it was commonplace to get offers subject to the sale of the buyer’s residence. When the market heated up in the mid 90’s contingency sales like this began going extinct, especially when investor’s entered our market and were making all cash offers and when multiple offers became more of the norm. An offer subject to the sale of the buyer’s home would not even be considered, and often it would not be considered even if the home was sold and in escrow waiting to close. Well, that’s no longer the case.
Now, new offers coming in that are in escrow awaiting the close are seldom refused just for the sale of the contingency. And lately, we’re seeing offers happening that are not in escrow. This is a real change to our market and is another positive sign of a “normal” market.
What should a seller do if they receive an offer with a contingency? Well, for one thing don’t toss it. If a buyer is really interested in your house, they will probably offer you full price, or close to it to make it worth your while. But price is only one consideration. Perhaps too, their home is an easier sell than yours, (i.e. less expensive, better location, better condition, etc). The bottom line should be which house will sell quicker.
Other considerations would include how long their house has been on the market? How is it priced? Your Realtor should do a Market Analysis on their home. If it’s not on the market yet, make sure you provide a clause in your counter offer that gives you and your Realtor a few days to examine the marketability of their home, then decide. And limit the time they have to find a buyer for their home, such as 30 days.
There are other considerations as well that your professional Realtor will advise you on, but today’s takeaway for our current market is for you to consider all offers, including contingency ones, if they make sense.
FORECLOSURE NOTICES OLDER THAN 2002
It wasn’t too long ago that a host of states were consistently in the news as leading the nation in huge foreclosure rates and right at the top of that list with Florida, Nevada and Michigan was Arizona.
Well the worm has turned! Now, Arizona is one of a few states leading the nation with the FEWEST foreclosures and new filings. In fact, since the foreclosure market peaked in March of 2009 with 10,712 foreclosures filed, the current number of new filings has dropped off the table to less than one thousand. Actual completed foreclosures are less than 500 per month now compared to the height of the market in March 2010, which saw 5450.
Local experts are expecting the foreclosure rate to continue stabilizing due to the stiffened underwriting standards now imposed.
NEW HOMES SALES DECLINE – NEW HOMES LARGER NOW
Although newly built single family home sales grew 4% from 867 recorded unit sales in August to 906 in September, the monthly total was 9% below the same month in 2013. The total dollar value of single family new homes closed in September was down from $311 million in 2013 to $302 million in 2014.
Closings increased month to month in both Maricopa and Pinal County. The average sq. ft. of a new home in August was 2,527 while the average sq. ft. of a normal re-sale was 2,024. This suggests the extent to which homebuilders have abandoned the entry-level market in favor of the move-up market. It also shows us why the median sales price of new homes is so much higher than for re-sales.
Thanks to Michael Orr of the Cromford Report for todays stats.
