by Dru Bloomfield on January 18, 2010
Buyers often say to me:
I want the best deal.
Which areas of Scottsdale will appreciate the most?
I totally understand where they are coming from. I like getting a great deal, too. The challenge is that you often don’t know you got a great deal until after you made the purchase.
Value comes in many forms.
I woke up thinking about a running jacket I bought for myself last week. I was cruising Zappos.com looking for gear, and stumbled upon this most-beautiful technical running jacket.
I mean, I was instantly attracted to the photo. And, then I started reading about the jacket and all the features it had. And, I zoomed in on the design and loved the details and craftsmanship. I was hooked.
But….
My mind started playing games. “It costs too much.” “You aren’t a good enough runner to wear such a professional-looking jacket”. “The season for jackets in Scottsdale is too short, you’ll never get the value out of it.”
And, then I reminded myself that my birthday was coming up, and that this would be the perfect splurge!
So, you say, what does this have to real estate?
Many of us have been operating from the perspective that our homes are investments, that they appreciate, we sell them, make a profit, and then buy something bigger and better.
Well, what if our homes were not an investment (like the Rich Dad, Poor Dad School of Real Estate reads), and they, in fact, depreciated, just like our cars and my brand-new running jacket?
Any investor will tell you that in the classic rules of real estate, you make your profit when you buy the house, based on the price paid, but I can tell you that the rules have been turned up-side down over the past several years, so….
What if a home buyer started looking for the home that best fit:
The location they liked
The neighborhood they preferred
The style of home that made their heart sing
The floor plan that worked for their life style
And a price that fit their budget.
Would that be a good deal?
I’m not saying to overpay for a home, nor am I saying that homes will not appreciate in the future. What I’m really saying is that a good deal is more than just price. Does your purchase meet your needs and desires? Do you feel good about it? Would buying the home that made you feel good, deep down inside, be the one that might be the very best deal for YOU.
Ask me while I’m running down the street in my new jacket that keeps me warm, breathes with me, and looks stylin’, and I tell you “Yes!”
by Dru Bloomfield on January 5, 2010
I took a class on FHA & VA Financing from Bruce King last week and thought I’d share a few of the notes I made in class. They may be a bit cryptic, so if you have any questions, please feel free to contact me or Bruce.
The lending environment has changed dramatically! Bruce shared that in 2002, his company offered 70 kinds of loans, and this year they offer just four:
- Government (FHA & VA)
- Conventional
- Jumbo (privately funded)
I learned that the FHA loan program was created by the National Housing Act of 1934 to help lower income families to purchase homes. It virtually disappeared in the white hot market several years ago, but it appears to me that it is now the most commonly seen loan for properties priced under the Maricopa County loan limit of $346,250. (effective 1/1/2010).
Correction: The Maricopa County loan limit remains at $346,250 for 2010.
Bruce shared some of FHA Myths (and then proceeded to debunk them):
- Too complicated
- Too much paperwork
- Too expensive for seller
- Higher rates
- Mortgage insurance cannot be removed
- Takes too long to close
- Doesn’t benefit the buyer
- Doesn’t benefit the seller
- Conventional is a better loan
- You have to have more money to close
- Conventional is a better loan
- Buyer can’t understand the loan
And then, he explained many of the benefits of FHA financing:
- No reserves are required, versus 2 months for conventional.
- 3.5% minimum down payment, versus 10% for conventional.
- Gift funds are allowed
- Non-occupant co-borrowers allowed (kiddie condo)
- Pricing same regardless of FICO score
- Up to $5,000 medical collections can be unpaid
- No credit history required — alternate credit such as car insurance, utility bills, or cell phones can be used.
- Minimum time after Chapter 7 is 2 years.
- Can be approved after one year of on-time payments after Chapter 13
- Minimum time period after a foreclosure is 3 years, unless there are extenuating circumstances, such death or serious illness
Gift funds are allowed for down payment and closing costs, and can be used can come from:
- Relative (some fairly specific requirements here)
- Borrower’s employer or labor union
- Charitable or non-profit organization
- Government agency
- Public entity with home ownership assistance
- First-time buyer program
First-time home owners can also use money from their 401K/ IRA’s as down payment. I’ve been told that in this situation, the buyer does not have to pay the 10% early withdrawal in this case.
Bruce said that qualifying for an FHA loan is based on the four C’s:
- Character (credit)
- Capacity (income)
- Capital (reserves)
- Collateral (value)
And, the buyer will need to have documentable income:
- Two years of employment / self-employment history
- Income must be stable
- Must continue for at least 3 years
Once the buyer has a loan approval and an accepted offer on a property, the FHA appraisal will be ordered. In addition to valuing the property, the appraiser will be evaluating the property looking for health and safety issues that must be addressed before the loan is approved.
Some of the the home repairs that typically must be completed prior to FHA loan approval are:
- Peeling paint
- Broken windows
- Plumbing leaks
- Exposed wiring
- Pool & pool equipment
- Termite damage
- Exposed exterior surfaces
- Roof issues
For home sellers who are considering accepting FHA financing, it’s really best to have these type of issues corrected prior to the FHA appraisal to streamline the process.
From my perspective, FHA loans have become the loan of choice for most, if not all, of the first-time home buyers I work with. However, I thought it was worth looking at the Scottsdale real estate market a little bit more closely to see if FHA is as predominant as I believe.
I reviewed single family home sales in Scottsdale for the month of December 2009 (via the Arizona Regional MLS), and found 35 single family homes had sold between $100,000 and $200, 000.
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16 homes used FHA financing (45%)
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8 chose conventional (23%)
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The remainder paid cash (31%)
In the price range between $201,000 and 300,000, the proportions changed somewhat. (The FHA limit was $346,250 through 12/31/2009.) A total of 69 homes sold in December.
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16 homes (23%) used FHA financing
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29 used conventional (43%)
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1 utilized VA
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The remainder paid cash (33%)
So, FHA is really funding a significant portion of the entry-level range of the Scottsdale home market, but does taper off as home prices rise. Buyers who are hoping to take advantage of the Home Buyer Tax Credit Extension will definitely increase their possibility of home ownership by taking a more serious look at FHA financing and discussing it with their lender.
I bought my first house, a couple years out of college, with FHA financing. It’s the only way I could have done it, during a period of double digit interest rates. I’m glad to know the program is still around, helping home buyers reach their goals.
by Dru Bloomfield on December 13, 2009
John Hall & Associates publishes a monthly e-newsletter for its real estate agents. Packed with lots of current and useful info, I discovered the following gem, which conveniently answered another question one of my clients had been asking.
Q: I’m already a homeowner. If I buy a replacement home after Nov. 6, 2009, to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit?
Michelle Lind, General Counsel/Asst. CEO for the Arizona Association of REALTORS® sent us the following response and websites:
A: If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (11/17/09).
Here are two websites that Michelle also sent.
From the Arizona Association of Realtors: Homebuyer Tax Credit Expanded and Extended through April 30, 2010!
From the IRS: First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009
by Dru Bloomfield on November 30, 2009
Almost a year ago, December 31st, 2008, to be exact, I got direct message from a prospective home buyer on Twitter. And a simple 140 character request turned into a wonderful adventure for first-time home buyers, who are now living in a beautiful house, with the mountain view in North Scottsdale that was so critically important to them.
Not that the road was without bumps. I wrote four, or was it five contracts, before we got one to stick. A short sale with a huge outstanding HOA bill, a foreclosure that couldn’t be sold to someone using FHA financing for 90 days, and a few other opportunities that just didn’t work out.
Over the course of the past year, we monitored the market and when a property with potential showed up, we hopped in the car and spent the afternoon together. Over time, we came to know each other, and I think, even look forward to the time spent together. The more I learned about my younger clients, the more impressed I was. They were focused, committed, and progressing in their respective careers. If their diligence in their home search is any indication, they will go far.
First-time home buyers can get overwhelmed with the search process and think that looking through hundreds of homes on the Internet will create a situation where we can go out and find the perfect house quickly. While it does speed the process, in reality (depending on the market and price range), it can take quite a while to find "the" house. And at that point, the agent and clients just have to hunker down, keep up the search, and be ready to roll if a house with great potential comes on the market.
I do use a lot of Internet tools to help shorten the car search part of looking for a home, BUT getting in the car and driving, visiting a select number of homes is critical. A buyer cannot get the feel for home values without doing the actual, physical leg work, because home values are both objective and subjective.
Price per square foot, in a given neighborhood or zip code, is easy to determine online. The value of a mountain or lake view, or proximity to other desirable locations, can be viewed and estimated using Google Maps and Google Earth. Time on market and how many price reductions the seller has made also give a buyer insight into whether the house is priced to the market.
However, driving up to the house and walking in the front door, will tell a prospective buyer more than any amount of online searching. Photographs, virtual tours, floor plans, and videos share a lot about a house, and are very helpful for a buyer to short-list homes they want visit in person. Buyers may even have a pretty good sense that a house is going to work for them, but until they get inside, walk the house, and really get a feel for its layout and how they feel inside, they just don’t know. Buyers have told me after the fact, that the moment they walked in the front door, they knew it was their house.
My clients closed on their house well over a month ago, and sent me a thank you card. In part, the note said:
Thank you so much for all your hard work. It has been a long road and a lot of lockboxes, and we appreciate you sticking with us.
I’d never thought of the home search in terms of lockboxes, but that’s what it takes to get in the front door, and that’s what a Realtor does to find the home that buyers are going to choose to live in, to wake in, to create memories in.
And, that’s what drives me to do the best job I can.
by Dru Bloomfield on November 7, 2009
By now you may know that the real estate tax credit has been extended to contracts written and accepted by April 30th, 2010, and also expanded to included move-up home buyers.
The National Association of Realtors published this helpful guide for comparing the program that was expiring on November 30th with the one which was just signed by President Obama yesterday.
NAR Issue Brief: Homebuyer Tax Credit
A couple of the highlights include:
- Purchase contracts must be written by April 30, 2010.
- Move-up home buyers are eligible for a $6500 tax credit, providing they meet income limits and occupancy rules.
- First-time home buyers are still eligible for a $8000 tax credit, with income limits.
- Qualifying home prices are capped at $800,000.
I suspect that there are a few home buyers that are breathing a sigh of relief, knowing that they still have time to find a home, make an offer, and close before the extended 2010 deadline.
And there’s the potential to release a whole new wave of homes for sale. Homes that have been lived in, where the owners have taken care of them, and will disclose the history of the home to the buyer. I’ve listed six houses like this in just the past two weeks, and I suspect that I will be hearing from a few more folks who’ve been sitting on the fence, deciding whether the time was right to sell and buy up.
I do have questions:
- Are move-up home buyers immediately eligible?
- What if they have an accepted contract scheduled to closed between today and December 1st?
UPDATE:
Here’s a link to the actual language of H.R. 3548: Worker, Homeownership, and Business Assistance Act of 2009. The bill appears to extend the dates, so that it appears that a seller who has lived in the current home for five consecutive years, out of the past eight, could get the tax credit for a home purchase as early as Monday. You will find the Extension and Modification of First-Time Homebuyer Tax Credit in Section 11.
by Dru Bloomfield on August 25, 2009
Last week, I had a buyer ask me if she could write offers on three separate properties, and then just go with the one that was accepted first. In theory, she could do this, although some would recommend disclosing that a buyer is writing multiple offers. In fact, this type of disclosure was done in the height of the market several years ago.
That market was very different from today’s market. Response time then was in hours and days, not weeks and months. Short sales were virtually non-existent and foreclosures making it into the MLS were not that common either.
The question my client asked is a tough one. And, from what I’m reading from other Phoenix Realtors, I’m not the only one getting this question.
The comments on Jay’s post show just how challenging it is for buyer’s right now.
My client just submitted her fifth offer to purchase a home, which is not all that many in this market. She was outbid on a several foreclosures. One short seller didn’t even respond to a full-price offer. And, this buyer is watching Phoenix home prices begin to increase in her price range, and she’s trying very hard not to panic. You can understand why she asked the question.
In the end, she opted to write one offer for the property that she really wanted. There’s still something about real estate, where a house becomes a home. And the look in her eye, as she walked through the door of the house, said it all. "This is where I want to live." Multiple offers or not, that’s what real estate is still about for most home buyers.
