Arizona Real eStatesman

What happens if your mortgage lender goes under?

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Thu, 01 Nov 2007 23:08:00 +0000

This article is relavent to the Phoenix real estate market and the Scottsdale real estate market. As lenders themselves file bankruptcy, what is the effect on homeowners whose loans they hold?

NEW YORK - Another well-known mortgage lender is in serious trouble. This time American Home Mortgage Investment Corp. may be forced into insolvency after creditors pulled the plug amid a worsening housing slump.

But what does it mean for borrowers when a lender goes bankrupt?

Some questions and answers about whether and how troubles at a lender could affect homeowners.

Question: What happens to my mortgage if my lender goes bankrupt?

Answer: When a lender goes under, it does not mean its assets - in this case home loans - are worthless. The company, under court supervision, would sell the assets and use the proceeds to repay its creditors.

That means your loan would wind up with another financial institution."

Generally, the consumer is not going to be affected," said Ray Hooper of the Consumer Credit Counseling Service of Greater Dallas.

But it is unlikely that your originator still owns your mortgage anyhow.

Q: Wait, so who does own my mortgage?

A: That is nearly impossible to say - and it doesn't really matter to you as a homeowner.

While it is possible the bank you dealt with still has your mortgage on its books, most lenders simply originate loans. They then package them together and sell them to a bank in a bundle.

In many cases, that bank repackages a group of bundles and sells them to the securities markets as mortgage-backed bonds or other complex financial instruments. So your $250,000 loan could be just a small fraction of a $500 million bond, shares in which are held by hundreds or thousands of investors.

In the end, though, "whoever holds the loan is still going to have to honor the terms of the contract," said Lauren Saunders, a lawyer with the National Consumer Law Center.

Q: Is there a chance that I would have to pay back the loan early?

A: No, your mortgage is a binding contract. If it stipulates repayment over 30 years, then you still have 30 years from the start date.

"No one is going to lose their home because the lender goes bankrupt," said Hooper.

Q: If the company goes bankrupt, can I stop repaying?

A: No. As the counterparty to the same contract, you agreed to repay the loan over a fixed period. Since someone still owns that loan, you must honor that contract, Saunders said.

Q: What if I pay a different company than the one I borrowed with?

A: If the company that sends you statements and collects your monthly payments is different from the owner, you are dealing with what is known as a loan servicer. If you have a servicer and the originator goes under, you may not even notice, Saunders said.

The servicer can change for any number of reasons, none of which change the terms of the contract.

Jeremy Herron
Associated Press 2007

Study Shows Record Number of Homes For Sale in Phoenix Area

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Wed, 31 Oct 2007 04:47:00 +0000

The Phoenix housing market continues to show weakness, according to a new survey that shows dips in construction starts and prices, and a record number of homes for sale.

Metrostudy -- a Houston-based real estate research firm -- said Phoenix regional housing starts for the 12 months ended Sept. 30 totaled 34,300 units, down 36 percent compared with the 12 months ended Sept. 30, 2006.

Metrostudy said West Valley housing construction starts are down 45 percent from last year. Most of the major new housing developments in metro Phoenix are in the West Valley or in distant suburbs to the city's southeast.

The research group said Arizona Multiple Listing Service figures show 54,200 housing units for sale in the Phoenix market -- a record high.

The study showed 9,500 single-family home sales in the Valley during the third quarter, off 23 percent from the 12,400 units sold during the third quarter of 2006.

Metrostudy, which tracks real estate markets across the U.S., said the average home resale price was $315,289 in September, down 10 percent from the previous month.

The numbers mirror other recent figures showing foreclosures rising in Arizona as housing market conditions remain sluggish.

The Business Journal of Phoenix - by Mike Sunnucks Phoenix Business Journal

BofA exiting wholesale mortgage lending

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Mon, 29 Oct 2007 17:34:00 +0000

Another indicator of big lenders restructuring to focus on core services. B of A continues to offer some GREAT, AFFORDABLE loan programs for Phoenix real estate and Scottsdale real estate. -JL

Bank boosts loan production through retail channel
Friday, October 26, 2007
Inman News

Bank of America Corp. will lay off 700 workers as part of a plan to exit consumer wholesale mortgage lending by the end of the year and make more loans through the retail channel.

The layoffs are part of 3,000 job cuts announced earlier this week, mostly in the global corporate and investment banking division. The division was blamed for a 32 percent decline in net income, to $3.7 billion, when Bank of America released its third-quarter results.

The separate decision to exit the wholesale mortgage lending business will affect 700 employees in locations including Brea and Rancho Cordova, Calif., Dallas, and Richmond, Va. Affected employees will have the chance to apply for open positions at the company.

Bank of America said it is expanding its retail lending, including the banking center, mortgage loan officer, Loanline and e-commerce channels. Employment in the bank's consumer real estate division totals about 13,000.

The Charlotte, N.C.-based bank said first mortgage production was up 27 percent in the third quarter compared to a year ago, driven by a 60 percent increase in originations through banking centers and a 26 percent increase in originations by mortgage loan officers.

Bank of America's new "No Fee Mortgage PLUS" loan has produced more than $50 billion in application volume in the six months it's been available on a nationwide basis, the company said in a statement.

According to the outplacement consulting firm Challenger, Gray & Christmas Inc., mortgage and subprime lenders announced nearly 70,000 layoffs in the first three quarters of 2007 (see Inman News story).

Urban Land Institute ranks Phoenix No. 9 in U.S. for real estate opportunities

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Fri, 26 Oct 2007 01:09:00 +0000

From American City Business Journals, 10/25/07

The Urban Land Institute released its annual trends forecast this week, with Phoenix rated No. 9 among major U.S. metropolitan areas for real estate investment and development opportunities.

The report, "Emerging Trends in Real Estate 2008," is a mixed bag.

On one hand, the report states: "People and businesses gravitate from lofty California cost structures to the more affordable desert oasis. The area captures back-office operations from L.A. and Orange County businesses and overflow from bursting-out Inland Empire distribution centers."

But then it suggests problems may be brewing: "The city is still one stop away from global pathways, and poorly planned sprawl development spells future trouble. The area needs revamped infrastructure to keep pace with all the growth, including more roads and improved sewage treatment and water systems."

It also questions whether the completion of light rail lines next year will be a boon to the urban environment as it has been in Denver, given that Phoenix "has no defined commercial core."

Phoenix is experiencing a "softening" of the office and apartment markets as a result of the housing glut and a slackening in migration.

The report gives its top ratings to Seattle, New York and Washington. Those metro areas are followed by Los Angeles, San Francisco, Boston, San Diego and Denver. Rounding out the list after Phoenix are Houston, Miami, Chicago, Atlanta, Dallas/Fort Worth and Philadelphia.

The report was released in advance of this week's ULI fall meeting, to be held this year in Las Vegas. The three-day program is expected to draw about 7,000 attendees from around the world.

Arizona, in particular, will be trying to elevate its position in the eyes of national and international investors and developers. The Arizona chapter of ULI has reserved one of the largest spaces in the exhibition area, naming it the Arizona Pavilion. About 25 public and private organizations have ponied up an average of $6,000 each for a presence in the 3,000-square-foot display area, which will tout Arizona as a sound choice for real estate investment.

SunCor Development is one of the participants in the pavilion. President and CEO Steve Betts, also a member of ULI Arizona's board, said his company hopes to benefit from the added exposure.

"We're optimistic that we'll be interacting with leaders and decisionmakers who will be interested in ... relocating their businesses in SunCor office, commercial or retail space," he said.

Wellington "Duke" Reiter, dean of Arizona State University's College of Design, another pavilion participant, hopes for even bigger returns.

"This is a great opportunity for the state to present itself on a national stage. We'll be putting on a really fantastic show," Reiter said.

The ULI meeting is expected to present an impressive show. Queen Noor of Jordan officially will begin the program with a speech Wednesday evening. Kofi Annan, former secretary-general of the United Nations, will wrap things up with a lunch speech Friday afternoon.

In between, participants can take advantage of dozens of presentations, which run the gamut from "Sustainable Development in the Desert" to "Retooling Our Aging Active Adult Communities."

The Correction Continues

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Thu, 18 Oct 2007 22:30:00 +0000

The Arizona Regional Multiple Listing Service (ARMLS) released the official stats for September 2007:

Home sales (units)
September 2007: 3,435
September 2001: 4,801

Average sales price
September 2007: $305,800
September 2001: $170,700

Median home sales price
September 2007: $234,900
September 2001: $128,000

The Phoenix real estate market continues to correct. Good for buyers and 'move-up' sellers. Expect the market to soften more as the traditionally-slow holiday season nears.

First Magnus Files Bankruptcy Plan

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Thu, 18 Oct 2007 04:10:00 +0000

I find it interesting that the failed lender actually tried to borrow $15M to fund it's wind-down plan! Fortunately, the court denied the request.

Associated Press, 10/16/07

Tucson's First Magnus files bankruptcy plan

Failed mortgage lender First Magnus Financial Corp. expects to repay unsecured creditors, owed a total of $93 million, between $16 million and $32 million under a newly filed Chapter 11 liquidation plan.

First Magnus, which submitted its plan to the U.S. Bankruptcy Court in Tucson, Ariz., on Monday, said it could have up to $32 million left after repaying secured creditors to provide unsecured creditors with a recovery of about 17 percent to 34 percent.

The mortgage lender said its pool of unsecured claims includes about $13.5 million in accrued payroll and related costs, $24.4 million of accounts and notes payable, $35 million owed to First Magnus Capital and $20 million of subordinated unsecured debt owed to insiders.

First Magnus, which sought Chapter 11 protection in August amid a meltdown in the subprime-mortgage industry, said it plans to continue selling off its remaining assets. The company recently won bankruptcy court approval to sell a pool of construction loans to Summit Investment Management LLC for $5.7 million and said it has reached a deal to sell another pool of loans to Steel Mountain Capital Management LLC for $61 million. The company has also found a buyer - Rynoke LLC - willing to pay $1.6 million for a commercial lot in Tucson.

First Magnus shut down operations and laid off nearly 6,000 workers before filing for bankruptcy protection on Aug. 21. The privately held Tucson-based company, which listed liabilities of $812.5 million and assets of $942.1 million in its bankruptcy petition, was forced to quickly sell off its assets after the bankruptcy court denied its request to borrow $15 million to fund its bankruptcy wind-down.

The slump in the U.S. housing market and a growing credit crunch have forced a rising number of mortgage lenders into bankruptcy proceedings this year. First Magnus has blamed "the collapse of the secondary mortgage market" for its decision to shut down and said it "simply could not withstand the liquidity crisis."

"Green" Renovations on the Rise

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Thu, 11 Oct 2007 21:09:00 +0000

Older buildings renovating to 'green' initiative
Andrew Johnson, The Arizona Republic

Going "green" isn't easy. That's especially true if you're a property owner or manager trying to retrofit an existing building. Not only can the process take lots of time and money, but it can also be difficult to convince tenants to buy into the idea.

Just ask Diana Rivers, a real estate manager with commercial brokerage firm CB Richard Ellis. She oversees Phoenix Plaza, a Midtown office complex at 2929 N. Central Ave.

Rivers and her team have been making internal and external changes to the property - which includes two 20-story towers, a four-story retail center and an 11-story parking garage - since 2004.

Among other things, the company has upgraded light fixtures and bulbs, installed lighting sensors to remodeled space and added "smart" sensors to the irrigation system on the property.

During the first half of the year, the building's energy usage dropped by about 1.1 million kilowatt hours, or by about $84,000, as a result of the changes. Rivers said the company expects to double that amount by the end of the year.

And while most tenants have responded positively to the initiatives, Rivers said, a few office dwellers have opposed some of them because they say they create a nuisance to their businesses.The situation highlights one of the main obstacles that Rivers and other managers and owners encounter when making properties more eco-friendly.

They say "going green" makes sense because of the energy savings and the long-term economic benefits. And with environmental issues gracing news reports, being eco-friendly also helps from a business marketing perspective. But despite the benefits, getting everyone on board can be a tough sell.

LEED certification

In recent years, there has been much attention given to the steps developers can take to lessen a new building's impact on the environment. But the movement also has inspired owners and manager of existing properties to update older buildings and make them more efficient.

Property owners who want to retrofit older complexes, often use standards set by the U.S. Green Building Council, which oversees the Leadership in Energy and Environmental Design, or LEED, program.

To get LEED certification, buildings must meet standards for on-site chemical use, air quality, energy and water efficiency, recycling and others.

Rivers said she wants the Phoenix Plaza to obtain LEED certification. The property is already one of only 49 in Arizona to have obtained an Energy Star, a distinction given by the U.S. Environmental Protection Agency and U.S. Department of Energy to buildings that take meets criteria for reducing energy consumption.

But getting the property LEED certified isn't necessarily easy. It's both expensive and time consuming.

In fact, an online database maintained by the U.S. Green Building Council shows there are just 24 buildings in Arizona that are LEED-certified.

Still, Rivers and others like the idea of making the properties more efficient, as well as doing something good for the environment.

Development firm Lincoln Property Co. also plans to go through the process to obtain LEED certification for Paradise Village Office Park.

The firm bought the 268,000-square-foot building through a joint venture with Sterling American Property Inc. in May, and has since taken steps to make it more energy efficient.

"It hasn't quite (caught) up with the way that buildings get built today," said Dennis Boles, development manager in Lincoln Property Co.'s Phoenix office. "Things are getting near the end of their life, so we're coming in and taking a look at how do we improve the building and make it a better place . . . aesthetically and environmentally and efficiency-wise."

That includes replacing toilet fixtures, which Boles estimates will reduce the building's annual water consumption from about 3.8 million gallons to 1.5 million gallons, "which is enough to cover an entire football field," he said.

Most of the building's approximately 80 tenants have been open to the changes, and that's primarily because it requires not out-of-pocket expense.

"It's not an additional cost to them," Boles said, noting that the changes are part of a $1 million renovation project underway at the 20-year-old building.

Tenant impact

While the work associated with making a building more energy efficient may cause consternation for some tenants, others say working in an eco-friendly environment fits with their business mission.

That's true for Phoenix-based Sprouts Farmers Market, which houses its corporate headquarters at Paradise Village Office Park.

"Being a natural foods retailer, we're always striving for ways that we can complement a lifestyle that goes along with healthy living," said Patti Milligan, director of nutrition and public relations for the company.

In addition, customers "kind of expect it, to be honest," she said.

Joel Nomkin, managing partner of Perkins Coie Brown & Bain P.A. law firm, agrees.

"In this day and age, it is more than a responsible decision to make every effort to protect the environment. It is a necessity," said Nomkin, whose firm is one of the largest tenants in Phoenix Plaza.

Still, some tenants balk at the eco-friendly improvements because they are either time consuming or because they don't reap direct cost savings from them in their lease rates.

For example, electricity and water expenses are often built into a tenant's lease contract, so they do not necessarily save money even if building management is able to do so by making the property more energy efficient.

That can make it difficult, Rivers said, to get some tenants to participate in the recycling initiatives her team has introduced.

She did point out, however, that the changes do have an impact, because if energy costs increase, tenants have to pay overage charges to accommodate the difference between the current rate and what the rate was at the time they signed their lease.

A reduction in energy consumption can help minimize those charges, which is something Rivers tries to point out to tenants.

Rivers also tries to appeal to tenants' social awareness - as she did when she provided everyone with recycling bins.

"It is an effort to recycle on this property for our tenants," Rivers said. "When I wanted to roll this out we had to position it in such a way that we wanted folks to participate because it was their social responsibility."

Buy a Home, Get a Lexus!

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Wed, 10 Oct 2007 22:13:00 +0000

Today the Business Journal of Phoenix reported:

In July it was a Hyundai Elantra, now it's a Lexus - a little something extra to woo homebuyers in a slow market.

Luxury builder Cachet Homes is partnering with Lexus for "Live and Drive in Luxury." From Oct. 12 to 21, Cachet Homes will offer anyone who purchases an inventory home in one of its 12 Phoenix-area communities a two-year lease on a Lexus. Cachet also is reducing prices on the homes by up to 20 percent, officials said.

Local Cachet communities include Carrara Estates in Gilbert, Cachet Homes at Verrado in Buckeye, Cachet Homes at Vistancia and Blackstone in Peoria and the exclusive Villas at Whisper Rock Estates in Scottsdale.

Earlier this year, Mountain Ridge Condominiums in Phoenix's Arcadia neighborhood offered Hyundai sedans to buyers.

For more information or to visit a Cachet Homes community, contact your local Realtor!

House Passes Foreclosure Tax-Break Bill

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Sun, 07 Oct 2007 20:22:00 +0000

A few days ago the House quietly passed a bill called the Mortgage Forgiveness Debt Relief Act of 2007 (HR 3648) that does away with the tax penalties that a homeowner faces when selling a home for less than what it's worth. Currently, the loss is taxed as a gift, because the lender forgives the amount of the loss.

The tax loss will be offset by modifications to the existing home sale exclusion policy, which grants a tax break on the profits of the sale of a home that's served as a primary residence for at least 2 of the past 5 years. The break is currently on the first $250,000 of profit for single filers and $500,000 for married couples.

To make up for the tax loss from HR 3648, the current exemption will be tied to length of use as a primary residence. The details aren't clear yet, but I expect we'll see the exclusionary limits remain unchanged at $250k/$500k with a tiered approach to the length of ownership, beyond 2 years for the full exclusion.

Read the highlights of the new Bill here.

View the text of the Bill here.

Home Builders Hurt Phoenix Housing Market (again)

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Sun, 07 Oct 2007 05:52:00 +0000

I read an interesting article in Business Week entitled, "Housing: That Sinking Feeling," which discusses the aggressive tactics that homebuilders are taking to clear out their unsold inventories. The article got me thinking about the homebuilders' role in the current market state.

Ironically, the Phoenix real estate market is being hurt (again) by homebuilders in a sort of pendulum back swing effect.

The run up in the Valley's housing market in 2004-2005 was exacerbated by over-building coupled with irresponsible lending practices by the builders themselves. Many builders sold double-digit units to investors who were clearly poised to either re-sell or rent their units out upon completion of construction. Neither high resale inventories nor high percentages of tenanted homes helps local property values.

As with many lending institutions, some builders' financing arms were overly lax with application approvals, putting some homeowners in risky programs that we're seeing play out in today's market.

For an interesting article on how homebuilders contributed to today's crisis by jumping into the mortgage business, click here.

Now we see builders, in a desperate play to generate cash flow and "hit their numbers," slashing prices so steeply that they're hurting their own customers, many of whom are experiencing such huge losses in equity that it will be a decade or more of historical appreciation rates before they can even hope to break even.

When builders slash prices, they do accomplish their goals, but they hurt surrounding homeowners in other ways, too. By lowering sales prices, they affect 'comps' values. Comps are used in most appraisals to determine fair market value for a given property. So properties that sell at fair market value in the eyes of the buyer and seller, but not in the eyes of the bank, won't close escrow unless the buyer and/or seller 'take their lumps' and compromise. Either the seller lowers the price or the buyer comes up with cash, if they want the deal to happen.

Furthermore, homeowners who have responsibly accrued some equity in their homes and want to pull some out through a refi may not be able to do so.

And all surrounding communities that have already been built out, suddenly find themselves competing with the builders if they decide to sell.

To the builders, this is business. To homeowners, it's intimately personal. Unfortunately, the builders have the advantage of deep pockets and being able to control the game, at least within their communities. The homeowners are the ones who suffer in the long run.

Guidance for Homeowners Facing Foreclosure

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Thu, 04 Oct 2007 02:25:00 +0000

The following post draws heavily on points from a recent article written by Michelle Lind, General Counsel for the Arizona Association of Realtors, and merits the attention, in light of its relevance in today's mortgage market:

Here are some options and resources for a homeowner in default.

Contact the Lender or a HUD-Approved Housing Counseling Agency
The natural reaction by many homeowners is to hide their heads in the sand in denial, until it's too late. To the contrary, the sooner you approach your lender about your situation, the more likely you are to work out a favorable resolution to your difficult situation.

When you call your lender, ask for the "Loss Mitigation Department" or the "Department responsible for negotiating loans in default." Explain the situation to them and find out if there are any loan workout options.

If you don't want to talk to the lender directly, contact a HUD-approved housing counseling agency, who can contact the lender on the homeowner's behalf.

Local Phoenix agencies include:

When you call your lender or counselor to discuss your options, have the following information on hand: loan information, monthly income documentation (pay stubs, tax returns), monthly expense documentation (utilities, child care, car payments, etc.). The lender may also require the homeowner to complete and return a loan workout package.

Possible Loan Workout Options

Possible workout options include:

Reinstatement: Paying the total amount owed in a lump sum by a specific date in exchange for forbearance.
Forbearance: An agreement to reduce or suspend payments for a short period of time.
Repayment Plan: An agreement to resume making monthly payments with a portion of the past due payments each month until they are caught up.
Loan Modification: An agreement to change the terms of the original loan to make the payments more affordable. For example, missed payments can be added to the existing loan balance, the interest rate may be modified, or the loan term extended.
Claim Advance/Partial Claim: If the loan is insured, the homeowner may qualify for an interest-free loan from the mortgage guarantor to bring the account current. If so, the homeowner will be required to sign a promissory note and a lien will be recorded against the home until the loan is paid in full.

The Option to Refinance with Another Lender

If the lender will not agree to a workout, you can look into refinancing the loan with another lender. Resources include:

Sale Options to Avoid Foreclosure

If neither loan workout nor refinance is an option, you may consider selling the property. The lender may elect to work with the homeowner to sell the home and avoid foreclosure. The options include:

Work Out Sale: An agreement not to foreclose for a specific amount of time to allow the home to be sold and the loan to be paid off.
Short Sale: In a situation where there is more debt owing against a property than the property's value, the lender may agree to allow the property to be sold for less than the loan amount and/or accept less than the amount owed as payment in full.
Assumption: The lender may allow a buyer to assume the loan and purchase the property even if the loan is non-assumable.

Deed in Lieu of Foreclosure

The lender may allow a homeowner to give back the property, an option that may not be possible if there are other liens against the property. Other resources include:

Be Aware of Predatory "Rescue" Scams

While there are many reputable and ethical groups that can help homeowners out of their desperate situation, there are also many predatory scam artists who troll the foreclosure lists for susceptible homeowners. Common scams include:

Loans with high interest rates and unaffordable repayment terms
Loan assumptions where the homeowner is not released from liability on the loan
Offers to repay the loan or sell the property if the homeowner signs over the deed
Counseling agencies that offer counseling for a fee when it is available at no cost

Remember, if it sounds too good to be true, it probably is. Be sure to report suspected scams to the Department of Financial Institutions.

Naturally, one of your best allies and advocates is an experienced and reputable Realtor.

Viable Investment Opportunities Return to Phoenix Real Estate Market

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Thu, 27 Sep 2007 05:47:00 +0000

The Phoenix real estate market has finally softened sufficiently that we're starting to see investors flow back in. I receive emails and calls daily from different types of investors, most of whom are far more sophisticated than the 'day-traders' who are partially responsible for the super-heated run of 2004-2005.

A few interesting dynamics to note:

-As lenders take back more and more properties that fail to sell at auction, some large investor groups have amassed huge funds (up to $100M) to acquire 'bundled portfolios' of properties at pennies on the dollar. Indeed, some believe that 'the small guy' will be crowded out of the foreclosure market as banks continue to bundle and sell off their REO portfolios.

-One Business Week report estimated that more than 50% of all mortgages taken out in Maricopa County in 2004 and 2005 were interest-only, which has very interesting implications on our housing market in the near-term.

-Tightening lending standards were the X-Factor that most didn't think would happen as quickly as they did. A few weeks ago, lenders called agents in my office and encouraged them to get their buyer-clients re-qualified and to obtain backup approvals for those under contract. A buyer who qualified for a program days earlier could suddenly find they no longer qualified for that program, or that the program went away altogether.

-None of the last several properties that my team has sold hit appraisal. Falling prices have trickled through the system so that the historical comps that appraisers utilize don't support today's sale prices. Expect this to become a more significant issue as more and more short sales occur.

-We're starting to see properties come up for sale that could be cash-flow positive rentals, which has not been possible in Phoenix for years, and is quite exciting to those investors who are bullish on Phoenix in the long-term. Indeed, Phoenix real estate is ON SALE!

It's worth pointing out that this is a great market for anyone who's looking to 'move up' (that is, sell a home and purchase a higher-priced home) or simply to purchase. The ones who are the most adversely affected are those who purchased since 2005 and, for whatever reason, *need* to sell today. Fortunately, that's a small percentage of homeowners.

The fact is, homes ARE selling...they just need to be staged better and priced lower than other homes in the community.

Phoenix Real Estate Update - September 2007

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Tue, 25 Sep 2007 06:10:00 +0000

As we approach the end of September, let's take a look at how the Phoenix Real Estate Market stands. All statistics are courtesy of the Arizona Regional Multiple Listing Service (ARMLS).

Active Residential Single Family Inventory: 57,785
Pending Inventory: 4,327
Sold (9/1/07 thru 9/23/07): 2,117

Inventory continues to grow and turnover remains historically low. The silver lining is that the downward pressure on prices has already begun to attract savvy investors, eager to capitalize on the 'poor timing' of the amateur investors of recent years. I expect the market to continue to become more and more attractive to prospective home buyers who otherwise couldn't afford to purchase here. And that's a good thing!

Design Trends: The House of 2015

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Sun, 23 Sep 2007 06:15:00 +0000

The National Association of Home Builders recently conducted a survey of more than 300 architects, designers, builders, and other industry experts to see how the home of 2015 will differ from today's average home.

Results reveal that the interior design and floor plan of the home of the future is going to change to reflect social and behavioral changes. For example, the family room is predicted to grow at the expense of the formal living room, reflecting the trend towards casual entertaining.

The average size is forecast to be in the 2,300-2,500 sq ft range, comparable to today's average. The strongest trend will be towards luxury. Extra bathrooms, state-of-the-art lighting and plumbing fixtures, and, I suppose, home automation systems.

Other predictions for the average home:

9-10 ft ceilings
2.5-3.5 bathrooms
Larger kitchens with islands
Fewer walls seperating their family rooms and dining rooms
Recessed lighting
Larger garages

More luxurious outdoor spaces are expected, too, with the proliferation of full back yard kitchens. Eco-friendly 'green' construction is also expected to play an increasingly pervasive role in home building and design, such as efficient water conservation devices and energy-efficient appliances.

I believe we'll see more integration of technology and design to suit the modern lifestyle. For example, climate control, lighting, and audio/video control systems that are centralized and adaptive to the homeowner's lifestyle and preferences. We'll see built-in refrigerators that track expiration dates and quantities and automatically update your shopping list accordingly. And out-dated materials, such as vinyl laminate countertops, will all but disappear as man-made or engineered materials (such as Silestone countertops) become more affordable.

Phoenix Real Estate Myth-Understanding 4: "I don't need a Realtor to represent me on a new home purchase because the builder's agent will."

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Thu, 20 Sep 2007 04:37:00 +0000

Truth:

The Builder's Sales Agent represents the Builder ONLY!

There's a sign posted on the front door of every model home sales office in the State of Arizona that states something to this effect:

"If you are represented by a Realtor®, they must accompany you during your first visit to this community."

Home builders factor a Realtor's® commission into the cost structure of every home they build, but they would much rather retain that margin than pay it out for your representation. Therefore, they take the stance that, if your Realtor® is not with you during your first visit to the community, the Builder's advertising must be the reason you found the community, and will thus serve as the procuring cause (see "Myth-Understanding 1") if you decide to purchase there. The Builder will not pay your agent.

Furthermore, if you do move forward with your purchase, with or without independent representation, the Builder will make you sign a disclosure form whereby you acknowledge that the Builder's agents and staff represent the Builder and the Builder only, not you. They may make you feel like you're long-time best friends, but in the end, the Builder's employees are obligated to do whatever they can within the confines of the law and company policy to enhance the Builder's bottom line. Shouldn't you have someone looking out for you?

Implications for the Buyers of Phoenix Arizona Real Estate

Whether you’re considering a new home, Phoenix condo, or a resale home, having an experienced Realtor on your side can:

-Help you negotiate more effectively with the Builder.

In today's market, a good Realtor® can often save their clients several thousand dollars above and beyond than the Builder's advertised incentives. At worst, having a Realtor on your side won't cost you a dime!

-Review contracts, addenda, disclosures, governing documents, and Public Reports for red flags.

In contrast to a residential resale transaction, a new home transaction is governed by documents that are created and drafted by the Builder. They are not the same Arizona Association of Realtors® forms that guide the majority of transactions. An experienced Realtor® will have seen enough Builders' contracts that he or she may be able to spot 'holes' or potential adverse implications before they arise, saving you time, money, and aggravation.

-Broaden your Horizons.

A busy Buyer's Agent may know of a new home community that even the best targeted search methods overlook. As an expert on today's market, he or she may introduce you to a community that is perfect for you that you would have otherwise never found.

Phoenix Real Estate Myth-Understanding 3: "I don't need to talk to a mortgage lender or Realtor until I'm ready to buy."

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Sun, 16 Sep 2007 06:05:00 +0000

Truth:

In fact, there are a few very compelling reasons to communicate with a Realtor® and a lender as soon as you think a home purchase may be in your future.

Your first call (or email) should be to your Realtor®. A good Realtor® will set you up to succeed with your search and subsequent purchase by providing:

-An Initial Consultation: Your Realtor® will schedule an initial consultation to help you build a detailed search strategy that is consistent with your real estate goals and your lifestyle. This meeting will give you a chance to assess whether or not this is the right professional for the job. During this appointment, you should receive a concise overview of market conditions, an introduction to the Realtor's® team and office environment, some background information about the agent, and he or she should conduct a detailed needs analysis that will be used to structure your search.

-Technology Tools: Your Realtor® can set you up for custom property searches so that you receive notifications anytime properties matching your criteria hit the market. During the early stages of your search, these emails will help you refine your search parameters and zero-in on the right neighborhood. Later in your search, these notifications will serve as your "heads-up" that your next home may now be available and waiting for you!

-Personal Knowledge: The 'Right' Realtor® for you is the one who you can call anytime and with any question and know that you will receive sound advice without sales pressure. A thriving realty group can be a fantastic resource for you --- helping you keep your finger on the pulse of real estate activity in your area. Also, some Realtors® are aware of 'pocket communities' that fall under radar of most homebuyers, but that perfectly match your search criteria.

-Valuable Partnerships: An experienced Realtor® will maintain a 'secret list' of top-tier contractors and service providers that may be needed before, during, and after the transaction. I'm talking about that "A-List" of professionals that you can turn to for the best work at the best prices. The list may include landscapers, electricians, plumbers, roofers, home inspectors, home warranty providers, and, of course, lenders.

Why should you contact a mortgage consultant as soon as you think a move may be in your future?

I'll give you three very good reasons:

1) A lender will tell you how much home you can afford in keeping with your budget so you can target your search appropriately,

2) A lender can keep you apprised of interest rate changes and offer you the ability to ‘lock in’ a rate once you’re ready to make a purchase, and

3) You will need to submit a Loan Status Report (LSR) or Prequalification Letter with any resale home purchase offer. The LSR serves as the Seller's assurance that you are qualified to complete the proposed purchase.

Implications For Someone Interested in Buying Phoenix New Homes:

If you wait to talk to a Realtor® and a lender until you’re ready to make a purchase, you’ll miss out on many of the tools and the knowledge that these professionals can bring to the real estate purchase process. In most cases, it’s a good idea to consult a Realtor® at least 90 days prior to your anticipated move date, and at least 120 days if you have a home to sell before you can move into a new home.

Phoenix Real Estate Myth-Understanding 2: "I can save money by negotiating directly with the Listing Agent."

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Thu, 13 Sep 2007 05:02:00 +0000

Truth:

As long as the property is offered in the Multiple Listing Service (MLS), this is almost always FALSE.

By the time a property is listed in the MLS, the Seller and the Listing Agent have already executed a Listing Agreement that details the commission to be paid upon sale of the home. The Listing Agreement is a contract between the Seller and the Broker. It dictates the total compensation due to the Broker when the house sells, regardless of whether or not another Broker is involved in the transaction.

Once the Broker has an executed Listing Agreement, the Listing Sheet that's advertised in the MLS creates the contract that dictates the commission (reward) that the Listing Agent will pay to the Buyer's Broker for bringing a ready, willing, and able Buyer.

So unless special provisions have been created and/or you happen to find a Listing Agent who's willing to cut their own commission, you will not be able to negotiate a lower price than if you had a Buyer's Agent negotiating on your behalf. The Buyer's Agent's commission has already been factored into the sales equation.

A small number of agents draft special provisions in their Listing Agreements that reduce their commission if they find the Buyer, but such arrangements are very unusual today.

Besides contractual factors, there are several other reasons to leverage the skills of a professional Buyer Specialist:

-Market Knowledge: A busy Buyer's Agent will preview several hundred properties per year, so they will have an intimate knowledge of property values in various communities and will be fully 'in-tune' with current real estate market conditions, giving them a natural advantage over any non-Realtor® who doesn’t have the time to closely track real estate market conditions.

-Access to Specialized Information: Realtors® invest in technology tools that allow them to 'dig deeper' into the details of any given property or community. When properly analyzed, this information can be used to put together a very compelling story to support your offer price.

-Specialized Training: Many full-time Realtors® attend negotiation workshops and seminars and have refined their skills on the job. The best of them engage in on-going training so they're prepared to secure for you the best possible terms.

-Knowledge of Contracts and some Real Estate Law: There are many terms of the Purchase Contract and Addenda that can be negotiated. Some are financial and some logistical. An experienced, full-time Buyer's Agent knows what these items are and how to 'weigh them' and where to 'push and pull' to get a favorable offer accepted. Furthermore, a good Buyer's Specialist will have enough experience to spot potential pitfalls or deviations from the norm before they have a chance to adversely affect the transaction.

Real Estate in Phoenix Gives Rise To The Following Implications:

Obviously, you don’t need to work with a Realtor® to purchase a property. It’s something you CAN legally do on your own. However, there are very few instances where self-representation will benefit you more than hiring an experienced professional to advocate your interests. An experienced Buyer’s Agent will not cost you a dime, but will offer you an arsenal of tools to position you for success from start to finish.

The Perfect Real Estate Professional?

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Tue, 11 Sep 2007 05:24:00 +0000

I have been thinking about my "Why people hate real estate agents" posting and would like to ask anyone who might be reading this a simple question:

What could a Realtor do to contribute maximum value to the real estate purchase and sales process, from your perspective?

Phoenix Real Estate "Myth"-Understanding 1: "It's OK to visit an Open House without my Realtor present."

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Sun, 09 Sep 2007 05:35:00 +0000

After working with hundreds of homebuyers, I've come to recognize that there are several common misconceptions that are widely held to be true by experienced homebuyers and first-timers alike. I refer to them as "Myth-Understandings" and I've seen many prospective buyers harm their own cause as a result of their misled belief in them.

Keep in mind that real estate laws very from state to state. If you have any questions about how this topic applies outside the State of Arizona, consult a local attorney in the state in which you plan to do business.

MYTH #1: "It's OK to visit an Open House without my Realtor® present."

TRUTH: Only if you don’t care to work with your Realtor® anymore! If you visit an open house, whether you’re represented by a Realtor® or not, the Realtor® hosting the open house becomes your only legally-recognized agent for that specific property and the only agent entitled to compensation by the Seller.

The legal notion of procuring cause states that the broker who engages in an effort which brings about the sale is the one entitled to the commission. (The Language of Real Estate, John Reilly, Fifth Edition) In this case, the "Open House" signs that guided you to that property would constitute the procuring cause, if you eventually decided to purchase the home. The Realtor® who hosted the open house would be entitled to the full commission, effectively cutting your Realtor® out of the equation. You’d be stuck working with the Realtor® representing the seller, regardless of how professionally and fairly you believe they’ll represent you.

Even worse, if you had signed a Buyer Broker Agreement with your Realtor®, which has no effect on procuring cause, you could be compelled to pay your Realtor’s® full commission yourself!

Here are a few other situations that fall under the procuring cause umbrella, where you could lose the ability to work with anyone other than the Listing Agent:

-You drive by a house for the first time and see a "For Sale" sign in the yard. Not wanting to bother your Realtor®, but motivated to see the property, you call the Listing Agent and arrange for them to meet you for a private showing without your Realtor® present. The Listing Agent's "For Sale" sign is the procuring cause.

-You see a gorgeous property advertised in the newspaper, so you call the Listing Agent and meet him at the home for a private showing without your Realtor® present. The Listing Agent's advertisement is the procuring cause.

-Your Realtor® is out of town for a week when, while searching on the Internet, you see that the 'perfect' property has just hit the market. You call the Listing Agent and notify her that you are already "working" with a Realtor®, but that you'd like to meet at the property for a showing so you can tell your Realtor® about it when he gets back in town. Since the other agent showed you the property, they would be the procuring cause.

-You visit the Sales Office at a new home subdivision that you've never visited before, just to take a look at the models for decorating ideas. While you are there, you fall in love with one of the homes. The next day you meet your Realtor® at the community to put an offer in on the home. Because you visited the community for the first time without your Realtor® present, the builder's advertising is the procuring cause and the builder would not compensate your Realtor®.

Implications When Looking For Phoenix Homes For Sale

In a non-dual agent role, your Realtor® is your agent, your trusted advocate whose sole function is to help you find and acquire the perfect property for your needs at the most favorable terms and conditions to you. The safest thing to do is to notify your Realtor® of ANY properties that you would like to see, including "For Sale By Owner" homes, new construction, and traditional resale properties. Your agent can gather the facts for you and make arrangements for you to visit these homes, when applicable. Furthermore, an experienced agent will begin positioning you for the potential upcoming negotiations with the other Realtor® from the very first communication.

Why do people hate real estate agents?

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Tue, 04 Sep 2007 04:32:00 +0000

A few years back I heard about a public opinion poll that had rated real estate agents only one spot ahead of used car salesmen in trustworthiness and likeability. At first I wanted to deny the results. "Show me proof of this poll!" I very quickly realized, however, that the existence of this poll was irrelevant. If such an idea could remain alive and circulate freely through the general public without being quashed, it's clearly not so far-fetched.

I vowed to do whatever I could to separate myself from "them." I created a slogan that let people know they could trust me to serve them. And I created a mission statement that captured the essence of my business philosophy:

"Re-defining the residential real estate experience through integrity, market knowledge, and professionalism."

Most importantly, I sought to understand precisely which behaviors led to the public's perception of my chosen path. In any service industry, the best way to learn how to improve one's performance and one's image is by understanding where we fall short. I use the term "we" to include all professionals working in a given field, because customers tend to lump various types of professionals together in terms of their characteristics (think "postal employee"), without regard for the natural tendancies that differ from person to person.

Very early on in the relationship I like to have a discussion with my clients about what sorts of experiences they've had with Realtors in the past, if any. Have you worked with a Realtor before? To buy or sell? Tell me about your agent. Were you pleased you used them? Why aren't you using them for this purchase/sale?

I've interviewed hundreds of people on this topic and few common complaints surface again and again.

Home buyers most often report that their agent "didn't listen" to them with regard to property characteristics. "We told him we wanted a house with a large kitchen, but he kept showing us houses with small, galley-style kitchens!" Or "We said our home MUST be in a certain community, but he continued to send us property listings for homes in other areas! He didn't listen to us!" Many of these buyers ended up ditching their agents to take their searches into their own hands.

Hands-down, the most common complaint among home sellers is, "My agent took my listing and I never heard from her again, except to suggest price reductions! I have no idea what she was doing to sell my house!"

Both buyers and sellers commonly report that their agent didn't negotiate as strongly as they thought they should have, or that a 'mistake' in the contract paperwork caused a negative financial impact (e.g. "He didn't tell us that our flat-panel big screen TV was considered a fixture and had to convey with the house!").

Unfortunately, the sales cycle is an emotionally-charged time for all parties, so any problem, either real or perceived, is magnified. Realtors are paid handsomely for their expertise and nobody likes to feel like they've overpaid and been underserved.

As for my team, we listen to and learn from our clients in order to continually improve the value of the services that we bring to the table. Whether we're working with a seller of a $150,000 Phoenix condo or representing a Paradise Valley estate seller, our service standards do not vary. Our clients put their trust in us to represent them as effectively as we can regardless of the price point of the transaction and that's exactly what we deliver.

Back to my original question, why do people hate real estate agents? I believe it boils down to a few key reasons, all centered around consistency and quality:

Low barriers to entry and perception of 'easy money' have flooded the market with agents, resulting in erratic service at best;
There are no standardized systems for running a real estate business - agents are independent contractors who are responsible for developing their own business and service models. This results in inconsistent (often incompetent!) service because it's beyond their expertise to build them;
There are no systematic mechanisms in place to regulate real estate agent performance - we're free to practice at any level of competence as long as we retain our licenses, which involves 48 hours of continuing education training every 4 years and not running afoul of the law. Only public complaints filed with the Department of Real Estate or legal troubles seperate the professionals from the rest. Otherwise, we all look the same.

The good news is that high quality real estate professionals will thrive in all market conditions, while those who aren't, won't. Every decade or so the housing market will 'correct' and the least capable agents will be forced from the business, leaving it a better place, at least temporarily.

The Valley's 10 Hottest Intersections

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Mon, 03 Sep 2007 05:25:00 +0000

On 9/1 The Arizona Republic reported the Valley's 10 Hottest Intersections in terms of development, growth and appreciation, as voted on by members of the Urban Land Institute.

Interestingly, only the top 3 intersections were 'ranked,' probably due to a lack of consensus on the others, so #'s 4-10 are only given honorable mention. Here are the results:

24th St & Camelback Rd
Scottsdale Rd & Camelback Rd
Mill Ave & Rio Salado Pkwy
Scottsdale Rd & Mayo Blvd
Central Ave & Washington St
Priest Dr & Warner Rd
Val Vista Dr & Pecos Rd
Price Rd & Willis Rd
95th Ave & Glendale Ave
99th Ave & McDowell Rd

I concur with the first 2, though I believe that the development plans that are in store for Scottsdale and Mayo, when coupled with nearby Desert Ridge, should put this intersection ahead of Mill Ave and Rio Salado Pkwy.

One thing that struck me about this 'article' was the extraordinary lack of added detail. Quite a bit of 'hard data' (e.g. traffic counts, median incomes, zoning, and land use) was factored into the analysis, but none of that data was discussed. From my perspective, that doesn't do much to substantiate the findings.

What's going on with the Phoenix housing market?

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Sun, 02 Sep 2007 05:34:00 +0000

In July I was asked to write an article on the state of the Valley's housing market for the North Valley Magazine. I decided to take a look at historical sales activity from 2002 (before the 'boom') to the present.

Using data from the Arizona Regional Multiple Listing Service, I showed that our market is more out of balance than many would believe. Inventory levels in 2002 ran around 25,000 homes in the MLS, which does not include new construction or For Sale by Owners. In 2007, we're over 56,000. Furthermore, between May 2005 and May 2006 inventory rose from 9,451 homes to 51,013! Days on market has risen steadily from around 65 in a normal market to around 90 in May. Today that number is over 96, so we still have not bottomed out yet.

Normal sales levels are around 6,300, but in July 2007 only around 5,300 homes sold. Consistent with the law of supply and demand, the increased supply and decreased demand has resulted in a healthy drop in the average sales price.

Not all is negative, however, as a few historical trends should continue to bolster our market. While no one knows for certain what the future has in store for Arizona, more than 5 decades of consistent growth and economic prosperity point to a bright future. Data from the US Census Bureau, the Bureau of Labor Statistics, and the Bureau of Economic Analysis show that Arizona has been among the top states in the nation for more than 5 decades in key indicators - population, employment, and personal income growth. Furthermore, Ariozona has been growing by more than 100,000 new residents per year.

By 2030, Arizona's population is expected to swell from 2000's level of about 5.1 million residents to over 11 million, bumping Arizona from the 20th to the 10th most populous state. These statistics support a health housing market in the long term.

I ended the article by proposing what I call the "5 Building Blocks to a Successful Sale in Any Market."

While most industry experts agree that the long term outlook for the Greater Phoenix real estate market is favorable and balanced, what about today’s home seller? What can she do to cope with the challenges of our market?

I’ve put together a list of five qualities, or building blocks, that any home seller can follow to consistently yield above-average sales results regardless of market conditions. They’re equally-important and just as relevant in a seller’s market as they are a buyer’s market. They are:

Right on pricing: The most accurate way to develop a pricing strategy is to put yourself “in the shoes” of a prospective buyer and visit several homes for sale in your community that are similar to yours. Only after you know how your home stacks up against the competition in terms of features, upgrades, and condition can you price it appropriately. Buyers today visit many homes and can very quickly identify when a home is not priced consistently with other similar homes.

Stand-out staging: You should never open your home up to a prospective buyer until it’s ready to show! Buyers in today’s market are rare and valuable commodities and you will only get one chance to impress them. Whether you lean on the experience of your REALTOR®, hire a professional home stager, or do it yourself, make sure you’ve tidied up, de-cluttered, and made necessary repairs or alterations to prepare your home for sale before you put the sign in the yard.

Aggressive marketing: The goal of any home seller should be massive exposure of their home to as large a pool of prospective buyers as possible. Your marketing plan should include a print component to attract local home buyers, as well as an extensive Internet strategy to attract global buyers. The fewer buyers there are in the market, the more important it is to extend the breadth and depth of your reach.

Diligent follow-up: Every single buyer who visits your home should receive a follow up phone call for feedback the day after the showing. Over time, you may receive consistent criticisms that give you the opportunity to adjust ‘on the fly’ and position yourself more favorably for the next visitor.

Smart negotiating: Many buyers and sellers focus so intently on “getting their price” that they overlook other factors that could mean the difference between a successful deal and a parting of ways. Before you rush to the negotiating table and risk losing a valuable buyer or the house of your dreams, take time to learn what’s important to the other party and compare them to your goals. Once you understand how your interests align, you’ll be in a better position to put together a win-win deal.

First entry!

noreply@blogger.com (Justin A. Lombard, MBA, e-PRO) — Sat, 01 Sep 2007 05:19:00 +0000

Ok, so this is it. My first post. Definitely won't be my most poignant or insightful, but you have to start somewhere, right?

Why this blog? Because it gives me the opportunity to share news, stats, tips, best practices, thoughts, opinions, and even random musings with others who may be interested in real estate.

I found my way into real estate when I finally decided to give it a shot and combine a passion of mine with a career. In the past I had been told, "You don't want to get into real estate because it's too competitive! There are too many Realtors out there!" While I won't argue with either of these statements, I will point out that even the most crowded service-driven industry can accommodate new players with fresh ideas and a desire to improve upon the way things are done.

The fact is, the field of real estate sales is comprised of a huge network of independent contractors who are required to formulate their own business strategies, plans, and models (within the confines of the law, ethical standards, and their brokerage, in that order). Low barriers to entry and the inaccurate perception of 'easy money' contribute to the allure of the field, causing many people to jump in who might otherwise perform better in other career pursuits. I think it took me about a day to realize that I could have my cake and eat it, too. Passion + career + opportunity.

This blog is the expression of my desire to discuss, share, agree, and disagree about topics within a field that has completely captured my interest. Thank you for taking the time to participate!

To learn more about me or my team and our approach to selling Phoenix and Scottsdale real estate, visit our website.