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For My Home Owner Friends, A Quick Thought

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The Phoenix real estate market can be summed up in general statements, just like anything else, but it’s also very clear that the diversity in the valley between subdivisions and communities that sit right next to each other often paints a strange story.  So, when we refer to the market moving in a certain direction, sometimes we have to get more specific in order to offer a more representative opinion relative to your home.

According to the data for the entire valley, the number of days that it takes to sell a home in the $150K – $300K range is hovering around the following numbers:

1-Year Average:  67 days.
Long Term Average (years and years): 80 days.

When the 1-Year average is below the long term average, the seller has an advantage.  One key point however is to note that the direction that the 1 year average is traveling is the more important measure of whether or not the rate of appreciation is increasing (more seller control and scarcity) or decreasing (seller losing control.)

Small fluctuations, even while in a seller’s market, can sway the advantage back and forth depending on the circumstances of your particular situation.

Seller’s Obligations: Home Owner’s Association has Less than 50 Units

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The Arizona Association of Realtors Residential Purchase Contract is a legal document. When entering into any legally binding agreement, it is the party’s responsibility to read and understand each section of the contract, and know your obligations and how they affect the purchase or sale of a home.

If you are selling your home, and your home is within a homeowners association, you have additional contractual obligations to the buyer.  If your HOA contains less than 50 units, you have more work to do than if it had 50 or more.  You see, if there are 50 or more units, the Title company handling your escrow will ensure the HOA is notified of the contract and the HOA is required by law to provide the information below, which is a very important section of the HOA Addendum.

Line 36 of the H.O.A. Condomimium / Planned Community Addendum [download id=”56703″] clearly states that if your HOA has less than 50 units, no later than ten (10) days after Contract acceptance (a date that can be affected by various contingencies in the contract), the Seller shall provide in writing to the buyer the information described below as required by Arizona law.

So for example, if contract acceptance occurs on the 4th of a given month, the 5th would be day 1 and the end of the 10 day period would be 11:59PM on the 14th.  This creates a contingency for the buyer which gives them an “out” if they don’t like what they see.  They buyer has 5 days after you deliver the required information to them to make that decision.

As time is of the essence, it’s better to get this information to the buyer as quickly as possible once there is a signed contract. Every contingency that is met and lifted during escrow is one step closer to your success as a seller.

Information required to be provided to a Buyer by Arizona Law

  1. A copy of the bylaws and the rules of the association.
  2. A copy of the declaration of Covenants, Conditions and Restrictions (“CC&Rs”).
  3. A dated statement containing:
    1. (a)  The telephone number and address of a principal contact for the association, which may be an association manager, an association management company, an officer of the association or any other person designated by the board of directors.
    2. (b)  The amount of the common expense assessment and the unpaid common expense assessment, special assessment or other assessment, fee or charge currently due and payable from the Seller.
    3. (c)  Astatementastowhetheraportionoftheunitiscoveredbyinsurancemaintainedbytheassociation.
    4. (d)  The total amount of money held by the association as reserves.
    5. (e)  If the statement is being furnished by the association, a statement as to whether the records of the association reflect any alterations or improvements to the unit that violate the declaration. The association is not obligated to provide information regarding alterations or improvements that occurred more than six years before the proposed sale. Seller remains obligated to disclose alterations or improvements to the Premises that violate the declaration. The association may take action against the Buyer for violations apparent at the time of purchase that are not reflected in the association’s records.
    6. (f)  If the statement is being furnished by the Seller, a statement as to whether the Seller has any knowledge of any alterations or improvements to the unit that violate the declaration.
    7. (g)  A statement of case names and case numbers for pending litigation with respect to the Premises or the association, including the amount of any money claimed.
  4. A copy of the current operating budget of the association.
  5. A copy of the most recent annual financial report of the association. If the report is more than ten pages, the association may provide a summary of the report in lieu of the entire report.
  6. A copy of the most recent reserve study of the association, if any.
  7. Any other information required by law.
  8. A statement for Buyer acknowledgment and signature as required by Arizona law.

If this information is NOT provided by the required deadline, the seller will be in a sticky situation and will probably lose the deal, if not end up being sued by the buyer for specific performance.  Please consult with your real estate attorney for any legal matters that may arise.

Interpreting Statistics: Sold Price vs. Asking Price

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Know what the statistics represent before making a decision.
Know what the statistics represent before making a decision.

Statistics help us know what happened so we might prepare for what could happen based on the patterns we’ve observed.  It is very easy to manipulate statistics to show results that will help us gain your trust and confidence.  One of the statistics that I’ve been looking at in the Valley is the percentage of sold price versus asking price.

When a home receives an offer, those of us who think statistically and mathematically will quickly determine what the percentage of the asking price the offer represents.  On a home that is listed for $300,000, if someone offers $285,000 they have submitted a 95% offer.  This information can be very useful for the buyer to determine what to offer the seller.  If the buyer were to look at this from the percentage angle as opposed to the dollar amount, and they were willing to put in a 90% offer, we’d know that their offer is going to be $270,000.  What the seller does at this point is up to the seller, but that’s not the point of this article.

With thousands of sales every month, it is becoming easier for us to compare your property to the rest of the market.  One of the comparisons we look at is the sold price to asking price, which helps our sellers understand what to expect when they receive an offer.  What has often been overlooked is the percentage result we obtain by determining the sold price versus the original asking price.  Most reports that we run are defaulted to show the list price at the time of sale, not the list price at the time the property was listed.

I conducted a simple comparison on 16 properties of a subdivision in the west valley that were all comparable properties.  In order to obtain enough results, I had to go back two years.  I compared the sold to list price of each property and then averaged the results.  What it showed was that on average, the properties that were selling in that neighborhood were selling for approximately 95.6% of their list price.

After calculating the percentage based on the original list price, which is the price for which the seller originally wanted to list their home,  the results showed that the sold price was actually  88.8% of the original list price.

Without conducting your own statistical analysis, it is difficult to understand what someone might be attempting to show you if they don’t disclose how they came up with their numbers.  On one hand, you could pitch to your buyer that it’s likely the seller will settle upon a price that is around 95% of the asking price.  Likewise, you could show a potential seller that their asking price is far too high and that they could expect on average to settle for 88% of their original asking price.

Make sure you know when you are presented with statistics what those statistics are actually measuring, and which statistics really matter to you.

What Does Escrow Mean?

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Susan Gruenling in an article entitled Open Sesame, outlined what it means to “open escrow.”  As I was reading it, I was thinking about what the word Escrow really means and where it comes from, so I did a little research.

If you ever learned Spanish, you probably remember that the verb to write is escribir.  A desk is an escritorio.  The word Escrow, according to The Online Etymology Dictionary is basically a scroll that is a deed delivered to a third person to hold until a future condition is satisfied.

In real estate transactions in Arizona, the escrow is the period during which the Title/Escrow company (the third person) holds the proceeds from the sale of a home until both the buyer and seller sign their documents at which point the funds are transferred from the buyer or buyer’s lender to the seller and/or lienholders of the property being sold.

In other businesses, escrow companies are responsible for securing the funds from the buyer and holding those funds until a future condition is satisfied.  When the conditions are met, the escrow company releases the funds to the seller.  An example would be the process of selling a vehicle or other high dollar luxury item, like a piano, over the internet.  If you have a car to sell, and someone across the country whom you do not know wants to buy it, you would most likely involve an escrow company to ensure that you get your money, and they get their car.

Experience the Fourth Advantage

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I know the market and our industry inside and out. After all that is what being an executive is all about.  Realty Executives agents average more years in the real estate profession and typically represent more buyers and sellers than the average agent.  The result?  The knowledge of what it takes to achieve the best possible results for you in the shortest period of time — whether you’re buying or selling.

 

Down Payment Assistance In Jeopardy

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For years now, home buyers have been able to receive down payment assistance when buying homes approved for FHA financing. Basically, when the buyer makes an offer, they ask the seller to contribute a percentage of the sales price towards a non-profit company as a gift towards future home buyers. Since the minimum down payment amount on FHA insured loans is only 3%, the buyers could ask for the seller to provide it.

When you purchase a home, you are not allowed to receive funds from the buyer directly to help you with your down payment. The seller, however, is allowed to gift the down payment to non-profit organizations who then provide the same dollar amount to the Title company at closing, covering your down payment obligations according to FHA rules.

The Department of Urban Housing and Development has issued a release that may end this practice altogether.

The purpose of FHA insured loans is to provide affordability and sustained home ownership. Here is a link to the proposal. It’s long, very long, and some of it is quite annoying to read, but it’s there.

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The problem that we have when someone provides a buyer with funding is that it may be unfair to other sellers. If I am selling my home for $300,000.00 and you need an FHA loan whereby you need to come up with $9,000.00 as your down payment, but you don’t have it, I as the seller could, at close of escrow, contribute $9,000.00 of my net proceeds (the money I make on the home) to that non-profit organization. The non-profit would then turn right around and pay you a gift of $9,000.00 towards the down payment.

By offering you the “gift” I’m basically telling you that I’ll pay you to buy my house over the neighbor’s $300,000.00 home. This does two things. It fulfills the down payment requirement by FHA, and allows the home to remain at full price.

We’re looking at these deals as the current “Sub-Prime” loan, and whenever Sub-Prime is mentioned, lenders cringe. What we don’t want is to perpetuate the idea that any average joe can get into homeownership when many of these people have no business buying homes.

Right now in the market, the opportunity to find a great home for the first time home buyer is at the forefront. If you are a first time home buyer, and you have been responsible about your savings and you have the required 3% to put towards the purchase of your home, then it’s likely you’ll be in good standing for years to come as you build equity and wealth through your home ownership. If you’re just looking to get into a home free, then statistics show that it’s more likely that you’ll also be walking away from that home because you have no real investment in it.