Flip or Flop?!

by MICHAEL BODEEN | Sep 2, 2014 | Bodeen Team Blog, Real Estate News

A number of clients and friends have asked me over the years my opinion on house flipping. “Can I actually make money doing it?” they ask. The short answer is yes you can. However, the process is NOT for the faint of heart.

By the way, what is house flipping? Very simply, flipping is (usually) the process of buying then quickly selling a home to make a profit. The idea is that one day the buyer acquires the property, quickly fixes it up, then puts it right back on the market (the flip) to sell. If you’re going to consider this endeavor, consider the following:

First, it’s imperative that the house you buy to flip is either priced well below the market and/or significantly distressed. It may take you weeks or months to find the right home to do it assuming you’re checking the market daily. You or your Realtor professional should have a good eye for the right property. As with all real estate value, location is hugely important.

From an investment standpoint, it’s best that you have cash or access to cash without having to get a new loan. There are hard money loans available (high interest – short term loans) but buyer beware, this is not recommended for most borrowers and the borrowing costs will eat into your profit.

Second, you need to know the current condition of the property you’re buying which may include more than just a typical home inspection. Make sure there are no hidden physical flaws. If you’re not well versed on the cost of renovating, it’s best that you have your contractor with you to examine the house as well. Actually it’s ALWAYS a good idea to have a second set of eyes to view your property. Also, make sure you get title insurance. Good title companies can also reduce these costs if you’re an investor and then you sell within 2-5 years. But you need to ask.

Once you’ve examined the house and know what you’re getting into, you need to determine the cost of flipping it which includes not just the physical remodeling, but also your closing and carrying costs (mortgage if any, taxes, insurance, hoa fees, utilities, title insurance, escrow fees, Realtor commission, etc). All of these costs and more go against your ultimate profit. You need to figure these costs for as long as it takes to sell the house. Your time estimate for this should be conservative.

Oh, and one other cost item that is often overlooked in the final analysis are income taxes. You will pay IRS based on your gain in the home. To defer any capital gain tax, you may want to consider doing an IRC 1031 tax deferred exchange if you’re planning on reinvesting in another investment property. (Have a chat with your CPA or tax attorney in these regards)

Once the home has been rehabbed, it’s ready to put on the market. The price you set should be a price that moves it quickly, even discounted against similar comparable sales. A home that sits on the market unsold will at a minimum be a drain on your profits. A quick sale for a very fair price will get you in and out and ready to embark on the next one!

A Short Sale Miracle

by MICHAEL BODEEN | Aug 25, 2014 | Bodeen Team Blog, Real Estate News

(A Short Sale Miracle Part 2)

Jonathan and I had been working two short sale listings that were under contract. On one, we had lender approval from the two lenders who were on the loan. We had been working on this listing since December 2013. We only needed Freddie Mac approval. (Freddie Mac is the Public-Government run GSA which attempts to keep mortgage money flowing to lenders. It is government regulated)

After months and months of difficult and frustrating work on this Short Sale, Freddie Mac said “No, we’re not doing the deal. Your client (our seller) does not qualify as he doesn’t have a sufficient hardship to qualify!”

We asked the Servicer of the first loan if there was anyway we can make this deal work? No way! Once Freddie Mac says “no” it’s “no!”

So now, we need to let everyone know, including the buyer (buyer’s agent) that we’ve got no deal. Bummer!!! The buyer was not happy, though they were well aware that this deal was a crapshoot to begin with. Still, they had big plans for the home, like even getting married there.

Several weeks go by and the buyer calls me directly – not his agent. He pleads, “Is there not anything we can do to buy this house!?” No, we reply, it’s dead. Then he adds, “I’ll pay more $. “No, we reply, they closed the file and besides, the money was not the issue, but that the seller was not qualified – made too much money.”

At this point, to show him that we’re trying everything we know to make this work, I said, “Okay, I know a guy in our company who does more Short Sales than anyone in town. I’ll call him to see if he’s got a connection at Freddie Mac. I’ll let you know.”

I e-mail my cohort at HomeSmart and cry on his virtual shoulder. He replied, “Mike, Freddie Mac is absolutely the worst, but I’ve got the President’s #. You’re probably out of luck. I called the number once and it went to voice mail and this guy leaves three names and #’s of people to contact if he’s not answering. Here are the three names and #’s.”

I looked at the names and picked the first one thinking, ‘this is a waste of time.’ The phone rang and a live person answered the phone — without going to voice mail! I was so stunned I forgot why I’d called. “Is this Samantha?” I asked?” Yes, how can I help you?” I explained the situation to her while profusely worshipping her for being a live sympathetic ear. She said she would look at the file and call me right back. Oh, I’ve heard that before, I thought. But she did. I was flabbergasted.

Long story short, Samantha checked the file, put a manager on it, and said if we can add $3000 to this deal, we can make it go. The buyer agreed in a heartbeat.

We’re several weeks down the road since then but believe it or not, we’re putting this deal together. I wish I could say it was my knowledge, my persistence and my wherewithal to do all this, but it wasn’t. It was a persistent buyer, a helpful fellow HomeSmart Agent, and a genuine caring lady at Freddie Mac who did the impossible for us. Truly, this was short sale miracle.

(A Short Sale Miracle Part 2)

Why I Do What I Do

by MICHAEL BODEEN | Aug 19, 2014 | Bodeen Team Blog, Real Estate News

You probably don’t know Judy, Alan or Ruth. But they are three of many reasons why I love my work.

Bittersweet! This past Thursday afternoon Judy and I sat down at the closing table of Magnus Title as Judy was signing the deed for the sale of her Scottsdale Ranch Lake home. She’s owned it for 14 years and has had good memories in this home, but to be honest, I was still somewhat surprised that she expressed some emotion as we hugged goodbye. But in the past few hours as I’ve thought about this house closing, I’ve been thinking about some of the reasons why I still love what I do. And it has to do with people like Judy.

I was referred to Judy by her longtime friend Alan Dube. Alan was a Realtor with me at Realty Executives a number of years back when I managed the office at Scottsdale Ranch. At 80+- years of age, though he looked 70ish, Alan no longer wanted to be active in real estate, but he would nonetheless come by the office regularly to chat with me and others – it was therapy for his loneliness. I was so happy that he took the initiative to get out of the house to see people. I would meet with him periodically at Barnes and Nobel on Shea and the 101 where he would faithfully, daily, read the paper at the Starbucks lounge.

From time to time, Alan would refer these wonderful clients (friends really) to me. Judy was one of those referrals. Judy has this way about her that brightens up my day. She knows how to make people laugh. That’s the thing about our profession — often, if not usually, our clients become our friends. If you’re able to talk about personal finances with someone, you will usually talk about anything under the sun. Whether it’s anger, joy, sadness or happiness — it’s an honest expression of our humanity.

Alan and I had gotten to know each other pretty well. He had had some heart problems for which he had been hospitalized at Scottsdale (Shea) Healthcare. Alan, the consummate sales pro that he was then made fast friends with one of the hospitals finest ER nurses, Ruth. Alan then referred Ruth to me to sell her South Scottsdale home and then Ruth bought a new home in Surprise. Ruth is one of the sweetest people I know. Her heart for her family, friends, and those she helps at the hospital is amazing. She has a sweet passion for people.

Shortly after Alan got out of the hospital he started to attend Scottsdale Bible Church near his home. He would later mention to me how much he looked forward to Sundays – it was the best day of the week as he was getting to know some of the people there. He told me how much he enjoyed the hymns and the Pastor’s message. Alan loved to talk about these spiritual matters as it was a somewhat new dimension for him later in his life.

Without exception, these friends of Alan loved him. He was in a word, adorable! I don’t think he was even 5’ tall, which perhaps led to his loveable nature. He would always speak his mind though – you could count on that. Sadly, Alan passed away in 2011. I miss him.

So yes, I am a Realtor Professional – have been for over 35 years. There were a number of other directions I could have taken and some directions I did take that perhaps I shouldn’t have, but each time, I came back to what I know and love. I have met so many Judy’s, Alan’s’ and Ruth’s and I’m a richer man for having known them.

Phoenix Market Update – or is it a Downdate?

by MICHAEL BODEEN | Aug 11, 2014 | Bodeen Team Blog, Real Estate News

Hey is that a new word? Nah, but it seems to fit better.

As is our custom, we want to continue providing you with the very best and latest real estate market data available, and we’ve got it, via Michael Orr’s Cromford report that the Bodeen Team subscribes to. By doing so, Orr gives us permission to share with our clients and friends this cutting edge information.

What we appreciate about Orr’s data is that it often transcends the MLS, which is very good information, but much of the research by Orr goes into the public records, which the MLS does not, unless specifically mentioned otherwise, such as Orr’s following report for July 2014:

Here are the basic MLS numbers for August 1, 2014 relative to August 1, 2013 for all areas & types:

The Bodeen market summation for those not wanting to be bored by the minutiae:

— Fewer Buyers. Fewer Contracts. Less Demand. Marginal Price Drop —

• Active Listings: 23,900 versus 16,456 last year – up 45.2% – but down 2.2% from 24,440 last month
• Pending Listings: 6,079 versus 7,755 last year – down 21.6% – and down 5.4% from 6,426 last month
• Monthly Sales: 6,805 versus 8,076 last year – down 15.7% – and down 6.4% from 7,271 last month
• Monthly Average Sales Price per Sq. Ft.: $126.53 versus $119.65 last year – up 5.8% – but down 2.3% from $129.56 last month
• Monthly Median Sales Price: $196,790 versus $185,000 last year – up 6.4% – but down 0.1% from $197,000 last month
• 30 Year Mortgage Rate with 740+ Fico, 20% Down Payment: 4.00% (*Source: Bankrate.com)

Similar to last month, active listings rose 4.9% between July 1 and August 1 in 2013 but fell this year by 2.2%. This weakness in supply is very unusual, but is hardly getting noticed because it is overshadowed by the prolonged weakness in demand.

There are a few strong areas in this market where demand exceeds supply. These include Sun Lakes, Sun City West and Sun City. Clearly baby boomers are doing their bit. Paradise Valley, Scottsdale, Fountain Hills and Gold Canyon have all improved their balance because supply has declined faster than the rest of the valley. In general, the higher you go in price range the better demand has held up.

All the talk of loan underwriters getting more flexible has not resulted in much change in buying patterns so far. Mortgage applications are low. Perhaps potential buyers assume they will either get turned down or have to provide too much documentation. Nationally too, purchase loan application rates remain weak according to the July 30 report from the Mortgage Bankers Association.

All This is to say, “It remains a very opportune time to buy!”