Struggling to Make Your House Payment? Already Behind? What's Next?

So I asked a few questions in the title that likely somewhere between 10% and 20% of you can identify with. In fact, according to certain studies, it is estimated that approximately 16% of homeowners will fall behind on their payments in 2009. That's a huge number, especially considering how many homes have already been lost to foreclosure.

So, if you, a friend, or neighbor are in this camp, don't feel alone. Sadly, it is a very common occurance these days. In fact, my dad and I get quite a few calls and emails from friends and clients considering selling their home, and well less than 50% of them actually end up listing their homes because they are unable or unwilling to take a loss. Now, there are all different aspects to this that we could discuss, but I want to focus on the options today. What are YOUR options if you are late on your mortgage or about to be? Well, we always advise that you consult an attorney and tax professional before making your final decision (call us for some of the area's best attorneys and tax professionals), but here are your basic options:

1.) Loan Modification/ Restructuring: So, you don't have an insatiable need to sell. In fact, you still like your home, and maybe it's the home you raised your kids on, and you just can't part with it if at all possible. Well, then this option may be a very good one for you. If this is the case, we will take a closer look at this option in the coming days, but if you can't wait for that, call us today to discuss at (928) 237-1908.

2.) Short Sale: So, you have come to grips with the fact you can't afford your payment any longer, and you don't have a particular need or want to stay in your home. Then, this option may be a good one for you. Short Sales can be a very long process, and frustrating, but in the end can save pretty big in the credit realm. Currently, most undwriting standards will let someone with a short sale on their record be eligible to purchase another home within 2-3 years! Not bad!

3.) Foreclosure: You have totally committed to getting rid of your home, and absolutely don't want to hassle with attempting a short sale. Well, before you commit to letting your home get foreclosed on, you may want to consider another option: "Deed In-Lieu of Foreclosure". In this scenario, you will typically contact your mortgage company, and ask them if they are open to doing a "Deed-In-Lieu". Now, we always advise you conslult an attorney and tax professional for any of these options, but what a deed in-lieu does is allow you to get back into the buying game a little quicker than if your home goes to foreclosure.

Now, depending on many factors, you may not know which is your best option. If that describes you, then definitely give us a call ASAP to get additional input about these options. (928) 237-1908. We are here to help. Next time, we will take a closer look at loan modifications. Tune in soon for more.............

Appraisal Confusion Anyone?

So, anyone have even a little confusion over the significance and weight of appraisals these days? I would hope that you just raised your imaginary hand, but if you didn't, you might benefit from a little insight on these things.

Starting with our take on appraisals, it is always funny to me how real estate agents will post on our MLS communication board about how a home is "priced way below recent appraisal". See, this wouldn't be funny except it is a given that any home that is going to sell is going to HAVE to be priced below appraised value. I think that the general public, including most real estate agents, buy into several misnomers about appraisals. Here they are:

1.) Appraisals are used to determine what a home will sell for
2.) Appraisals are the most accurate tool for determining the value of a property

Neither of these falcities could be further from the truth! In fact, I had an excellent and lengthy conversation with a local appraiser this morning about this very thing! See, lenders higher an appraiser to value a property, but probably for a very different reason than what you might think. It is definitely not number 1 or number 2 listed above. In fact, lenders look at the appraisal as simply a tool at their disposal, used to determine if the loan they are considering is a good one or not. Additionally, when a lender wants to know how much they might be able to sell a house for, they hire a real estate agent to do what is called a BPO, or Broker Price Opinion. In fact, when they have a "distressed" property, or have recently taken a property back in foreclosure, lenders will commonly have between 5 and 7 BPO's performed to track the actual saleable value of a property.

So, you might want to realign your thinking as to the usage of an appraisal. If banks lean more heavily on BPO's than appraisals for a sales value of a property, then what should homeowners do? Well, on the client side of things, we actually provide a complimentary BPO to any homeowner wanting to find out what their home is worth today. Only, we call it a CMA, or Comparative Market Analysis. In fact, you can request one HERE. But instead of having to pay us for it like the banks do, we offer it to you for FREE! Or, if you would rather simply discuss your options, give us a call today. Until then.....

So, What IS Coming in 2009 to the Prescott Arizona Real Estate Market?

I mentioned last week that we would take a look at the year to come in the near future, so wanted to dust off the crystal ball today, and see what we can predict. Or, lets say "suggest" might happen in 2009 in the Prescott, Arizona Real Estate market. We will take a look at 3 different aspects of our local market: 1.) Inventories 2.) Prices 3.) Interest Rates

First off, if you haven't looked at our inventory chart we put together that encompasses the last 3 years, you can take a look in at it HERE (and you will probably want to do that first). So, now that you have seen where we have been, we would suggest that inventories in 2009 will likely creep back up, but won't likely go much higher than the 2008 high of approx. 2700 site built homes. Currently our inventory has sunk to 2,315 homes on the market. So, you can expect stabilized inventories over 2009 when compared to 2008, which would point towards stabilizing prices.

Secondly, as just mentioned, we believe prices will begin to stabilize in the resale markets over 2009. This is good news of course, unless your pockets are full of cash. Which is likely not the case for most of you. If it is, please call us right away and we can difinitely help with that!

Lastly, regarding interest rates, our best sources are predicting that rates will remain stable over the next 1 to 2 quarters, possibly the lowest rates we will see in our lifetimes! The fed is likely cutting rates again, and we will likely see (actually already are) sub 5% rates with a point buydown. How does 5% translate when buying, say, a $200,000 home? Lets say with 5% down, and a 5% interest rate amortized over 30 years, your PI payment would be $1020! That is less than rent in many cases!

So, backing out and taking a look at the bigger picture, we have stabilizing inventories, truly record low interest rates, and stabilizing pricing in the resale markets over 2009! Sounds like a great year to me! If you are considering investing in 2009, don't wait until rates adjust back up, cause 1 thing is for sure, right now the gettin is good!

Understand the Market, or Loose Your Shirt!

We recently (actually just over a year ago) had a beautiful home listed out Williamson Valley Road, that unfortunately went to foreclosure. So, we contacted the bank to see if they would want to list it with our team. The bank rep. indicated he was coming to town to get the listing signed (and we understood that it would be with our team). So, we prepared our market analysis and marketing plan, emailed him all of the documentation, and scheduled a time to meet. Several weeks later, I met him at the property as planned, with the intention of signing the listing. Just to back up a little, this home had been listed previously for $1.15 Mil, expired at $899,000, and we subsequently listed it for $849K. We were stuck on price as the seller had no room to come down.

So, the nice gentleman from the bank comes to town, and from the first minute I meet him, begins to tell me why he wasn't going to list the home with our team. Given the circumstances, and our track record, I could only be led to believe that it was because he didn't like our recommended listing price of $725K (which would have likely brought a contract in a relatively short timeframe at the time). He insisted the home was worth more, and he wasn't going to be listing with us, so I bid him "good luck", and went on my way. So that brings us to yesterday, when we discover the home had recently sold! Upon further review, here is the briefest possible summary of the listing from the day we parted with it.

Original list price with agent #3: $875K (yes, $150K higher than our recommendation)
Final list price with agent #3 prior to expiring 8 months later: $765,500! (getting closer to our price)
Original list price with agent #4: $695K (yikes, now the bank is loosing big time)
Final resting place with agent #4: $518,750 (they lost how much by being greedy? Right around $200,000 in all likelihood!)

So while this saga ended yesterday, many more situations just like this one are playing out today, as we speak. In the above scenario that is almost painful to watch is all too familiar to us in this market. And, if you are to gather one thing, it should be this (and you can quote me). In a declining market, the sooner you take your "loss", the more money you will make! Sounds crazy doesn't it? But it is true. Because you see, with every passing day, that "equity" that has been falling out of your pocket for the last 3 years continues to flutter away in the wind. Time is the enemy. Just be sure you don't let time erode all of YOUR profits! Yes, if you need to sell in the next 3 years, you don't have more time! There is only today! You must sell NOW!

What does it take to sell a home in this market?

So, we promised we would spotlight what it takes to get a home sold in Prescott Arizona in the worst historical market on record. And as promised, here goes.........

Setting the stage, we wanted you to see what this market looks like through our eyes, particularly as we go to show property to clients looking to buy. The scenario typically starts by setting our clients up on "automatic drip email", which simply put, automatically emails them properties that match their criteria once the come available, or reduce price to be within their range. We are generally concurrently looking for other homes that may not otherwise show up for one reason or another, and when the time is right, take the top properties, and go view the homes together, starting thr process of elimination. What is interesting about this process is, time and time again, we see clients pass on properties that are obviously over-priced (but still match their criteria) reasoning that the seller must be too unreasonable and therefore would be a waste of their time to pursue that particular property.

Additionally, we see clients delete properties out of the listing cart we set up for them, simply because it doesn't have enough photos, or there is no virtual tour present. You see, it is very common that buyers are out of state, searching property on the internet, coordinating a trip to the Prescott Area. And when they come to town, they don't want to wast time driving by or having us drive by or preview for them, all the properties that looked really aweful in the photography, or had very poor ad copy. There are simply too many homes on the market to waste your time with poorly marketed or overpriced homes!

So then, we schedule our appointments, and go look at homes. At this point, what is a buyer looking for, or being affected by? Firstly, the home has to be a good fit for them in regards to layout, lat of the lot, etc. However, many people won't ever realize that the home is a perfect fit, if it is messy, poorly decorated, over-decorated, or un-maintained. You see, nobody wants to buy somebody else's problems. So, if there are any apparent or glaring problems, there is an excellent chance that the average buyer will quicly cross it off the list, and move on to the numerous other great deals out there.

So, how do you play all your cards right (because that IS what it takes to sell in this market) in order to get your home sold in a timely manner. Well, as you may have suspected, and we like to remind people, "all real estate agents are NOT the same". This should matter to you, in that, you MUST pick a real estate team that has the track record for success in this market, and is prepared to play all the cards just right. It should not be left up to the seller to price their home perfectly, market it perfectly, have the knowldege to stage it perfectly, and the communication systems to make sure they coordinate all the aspects of the sale just perfectly. Believe it or not, those things are all the job of the real estate agent. So, picking the right one, is IMPERATIVE! Do interviews. Check their track record. Review their systems. It is all a must! Then, you can rest assured your home WILL sell! Yes, even with all of the foreclosures and short sales out there, it will sell.

Now, of course we want to tell you a little bit about what our team provides. For starters, make sure you check out our "VIP Seller Program" HERE. It is the part of our roadmap to success that we can publicly disclose. Now, of course there are certain things we do that we don't want our competition to know about. So, you will definitely want to call us for the rest of the story. Additionally, we have only covered certain aspects of what it takes to sell in this market, but for the rest of the story, make sure you check back regularly, as we will be spotlighting this topic each Monday for the next month, giving helpful insights that you really can't live without, whether you plan to sell ASAP, or 2 years from now. Until then...

How Many Expired's?

Logging into MLS early this morning, expecting to see a healthy number of expired listings (as each year many people list through 12/31), I was truly blown away to see 480 expired listings in the last 72 hours! 198 of these were residential homes, and the remainder were a mix of commercial (27), land (290), multi-family listings (11), and a few other misc. listings. I was curious to see if we had ever had a year with a higher number of expired listings, and as was no surprise, we have never come close to 480. In fact, when looking up the residential sector, the most we had ever had at year's end was 100 which happened last year.

So, what does this mean for our inventory scenario, which was presented in our last blog (be sure to read if you haven't yet)? Well, as history has shown, the majority of the 480 sellers will eventually re-list their properties again, but will do so over the next 3 months, contributing to a likely recovery (in this case "recover" is a bad thing) of inventory levels to at least what we were at 4 days ago. You see, many people become dis-illusioned after 2, 3, or even more failed attempts to sell their home. As such, they don't always rush to get it back on the market. In fact, they may not do so again until they come to grips with the fact that in a declining market, with evey passing day, they are loosing more and more money! If you watched our last webcast (again, if you haven't, you really should), you know that some areas experienced as great as 22% depreciation in the last year! That's nearly a 2% loss of equity for every passing month that you aren't able to sell your home in certain areas! So, once this realization is had, most people get more agressive and get their home back on the market. (Please note that we take a firm stance, that if you aren't 100% commited to selling your home at all costs, then you shouldn't list it in the first place, as you are actually negatively impacting the market)

The sad reality is, however, that 2/3 of them still won't sell this time around either. So, what does it take to sell in this market anyway? We'll cover that, in-depth, on Monday! Till then, if you are one of the 480, stop wasting time and give us a call today! (928) 237-1908.

Prescott Real Estate Data!

To all of you real estate information junkies out there, we wanted to end the year by doing a summary of 2008, taking a close look at each of the 4 local markets individually, but also the area as a whole. The chart to the left, which you can download by clicking on image, is a special version of our "inventory charts", which we publish monthly. In this case, we put together a 3 year summary graph, which has the total number of area site-built homes (blue), under the total number of sales (red) for each of the last 36 months. As you can see, our graph ends in October 2008, as our November and December inventory charts will be published soon.

Taking a close look at this graph, you will note that historically, our inventory balloons in the summer months, and tapers off through the winter. However, in 2005, Inventory shot straight up, not taking a breather until late in 2006. This was due to many people trying to jump on the "cash out" bandwagon a little too late, as our local market price point peaked right around Christmas 2005. As a result, inventories, or our supply of homes, has mushroomed for the last 3 years, but if you watched our webcast (viewable at www.LFTperspective.com on the sidebar, or by visiting our youtube channel at http://www.youtube.com/acalong77), you know that stastical indicators suggest a cap to inventories fast approaching.  What is to come in 2009?  We will break it down over the next week, so be sure to check back daily.  We will also be posting new inventory charts in the days to come.  Until then, Happy New Year!  

Falling Interest Rates! The Stars Are Aligning!

With home prices continuing to fall in the Prescott Area, and interest rates falling even faster, the optimum time to buy is fast approaching, if not already here! Rates are hovering just above 5% but with a 1 point buydown, are readily available below 5%! We haven't seen this territory for years, and who knows when the next time will come. We get a particular question from buyers very frequentl, that being, "should we wait and see if prices come down more before we buy?". This is a common, and fair question. Consider for a moment that just a few months ago, we were experiencing interest rates close to 7%! And, again, they are close to 5% as of the time of this blog. Lets consider for a moment that you were purchasing a $200,000 home at 5% interest with 5% down. Your PI payment would be $1020/ month. Now, consider for a moment that the price on that same home falls another 5% over the coming months, but interest rates jump back up to 7%, that same home with 5% down, while now selling for $190,000 would cost you $1,287/ month! So, is it really a better deal? Depends on whether or not you are financing the mortgage. In fact, your break-even for payments would only come if that same home fell a total of $38,632! That is equivalent to nearly a 20% decline in property value! Now, we are all a little curious just how far the market will continue to slide, but with the massive devaluation in property (yes, even in Prescott) over the last 3 years, we believe that another 20% is VERY HIGHLY UNLIKELY!

So what does this mean for buyers in the local Prescott Area market? Simple. Either way (waiting or buying now) there is a certain amount of calculated risk. However, in buying sooner as opposed to later, the risk is more managed. In other words, it is more predictable. See, one of the underlying reasons as to why our market is in the current condition it is, has to do with home buyers not managing their risk in a sensible way. They let their emotions get the best of them, and rolled the dice, hoping that the phenomena we saw in 03'-05' would continue at historic rates. We all know that this didn't happen, and looking back, it seems now that it was foolish for masses of people to assume that it might. So, where does that put us in 1 year. Looking back not believing how more people didn't take advantage of the amazing opportunity that exists right now? Time will tell...........