ALL PHOENIX REAL ESTATE

As Keith Jackson might put it, the Phoenix real estate market has a little hitch in its giddyup this week. Inventory continues to fall but sales also have dropped off for the month of June after extremely strong showings in April and May.

We have had 6,547 closed sales the past 30 days (not quite final June numbers since we won’t know what closed today until it appears in the system tomorrow) which is down about 500 from last week’s report. Inventory fell by just under 200 homes for an absorption rate of 3.17 months.

Bank owned sales over the past 30 days fell under the 4,000 mark to 3,904; inventory remains low at 3,188 but the drop in sales have given us a slight increase to .82 months of inventory.

For short sales, there are 5,249 active listings and 831 closed sales over the past 30 days for 6.32 months of inventory. And among non-bank owned, non-short sale homes, there are 12,304 active listings and 1,812 closed sales for 6.79 months of inventory.

As always, the particulars for the various cities and towns in the Phoenix real estate market are below. And also as always, all data is provided by the Arizona Regional MLS and is deemed reliable but not guaranteed.

Phoenix Real Estate Inventory: June 30

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These days, with homes in the Phoenix real estate market often selling within a handful of days and no time to preview or show before writing an offer, it seems I’m spending more and more time simply writing contracts.

Should one get accepted then I move into the regular mode - ordering and attending inspections, coordinating the transaction between the lender, buyer and escrow, negotiating repairs (unless it’s a bank owned home and no repairs are being made) and all the rest of the work that goes into a successful home purchase.

But 95 percent of the offers I’m writing aren’t getting there. And since my role is a bit more limited - I have less overhead when I’m not driving hither and yon to show homes to a buyer before he or she makes a decision - I’m wondering. Is there a place in the Phoenix real estate market for an agent chargining an up-front, pay-per-contract-written fee?

DOJ fun prevents me from using real numbers. But let’s say I started offering a service where a buyer pays me $XX per contract that I write. Should one prove successful, the amount paid would be credited back out of the commission paid either in full or at most up to the amount of the commission.

If you’re serious about purchasing, would you be willing to pay to have the time that it takes to research a property and write a contract?  Does a program such as this sound better or worse than charging an up-front retainer of a certain amount on homes under a certain price point?

Of course, the obvious flaw is there are hundreds if not thousands of local agents who will write the contract for free. Some of these are the same ones who will flaunt local MLS rules and hand buyers the lockbox codes without thinking twice.

Still, the quickly multiplying contracts sitting in my Documents folder makes me think that this might be a path worth pursuing.

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There was an article over on Active Rain today that had me shaking my head. The basic implication was pricing a property competitively to sell is important but outstanding marketing could help bring in some extra dollars.

Realizing that all real estate local, that’s simply not true in the Phoenix real estate market these days. In fact, one could debate whether it’s ever been true.

I have a buyer looking for properties in two subdivisions in Goodyear. We’ve been in the midst of the multiple offer mosh pit on a couple of places and after coming away bruised but unsuccessful I thought I’d check specifically among non-bank owned, non-short sale homes.

Guess what? There’s nothing to be had at a competitive price. Maybe this is because any home that was competitively priced already has gone under contract. But there wasn’t a single home I could point to that was within shouting distance of market value based on the rest of the comps.

But the bank owned homes are beat to hell …

No, they aren’t. At least not all of them. The homes we recently have bid on have been in good condition … not pristine, but truth be told, almost no homes really are pristine.

Marketing can help a home sell more quickly and can possibly raise the value slightly but at the end of the day prevailing market values are going to tell the tale. No one is going to pay $25,000 above list because of the customized yard sign or color flyers. Those may help sell your house versus another, but only if the price is right.

When in doubt, KISS continues to apply.

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For the past several months, I’ve been fielding about an inquiry every two days about homes appearing on the Phoenix real estate market for under $50,000. These homes, though, aren’t always the deal they appear to be. Here are a few of the reasons why:

1) Financing. As you drop below $50,000 you’re approaching the lowest level where a mortgage can be obtained. And getting that mortgage depends on the condition of the home. No stove? No FHA loan. No air conditioner and other major repairs needed? No conventional funding available either.

2) Condition. When the median price for a home in Phoenix is well over $100,000 and you are looking at homes at one-third to one-half that price, might there be a reason? Often the key is condition - homes under $50,000 almost always are going to need some work. It’s just a matter of how much and how much it’s going to cost. In some cases, by the time you’re done with the repairs, you paid far more than you ever expected to pay.

3) Location. Sub-$50,000 homes are available only in a handful of locations. Steak tastes on a meat loaf budget isn’t going to work.

4) Competition. Few homes under $50,000 receive less than one offer. Most are getting multiple offers in the door the first day or two the home’s on the market, and many of these offers come through sight unseen. Buyers are firing the offers first, getting a home secured, and then using the inspection period to find out what they bought.

Truthfully, this phenomenon stretches well about $50,000. I have a couple closing on a house in Queen Creek tomorrow that we secured on our 14th or 15th contract.

The bottom line with any real estate, but particularly with these homes, is you get what you pay for. If you’re searching for the lowest sector of Phoenix real estate, you’ve got to expect the homes aren’t going to be pristine and aren’t going to perfect (and they’re not going to be in Scottsdale.) If they were in better condition, they wouldn’t have bargain prices attached.

Got more specific questions? E-mail address is at the top of the page.

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A bank owned home - this one a former model and still model-perfect - goes on the market in north Surprise at a list price of $182,000. More than a dozen offers flood in. Comps indicate that the home might be worth $200,000 on a good day but that doesn’t stop the buyers from climbing all over each other.

Winning bid on the home? $224,000. And that’s where the problems began.

You see, in the quest to obtain the highest possible dollar for the home, the lender seemed to forget about a little detail called the appraisal. (Why should a bank remember that the appraisal’s part of the deal, since the bank requires appraisals before issuing loans?)

With a normal seller I always discuss the looming appraisal - usually as a matter of trying to keep sellers from overestimating their home’s value. My guess is the bank (or more correctly, the bank’s asset manager) never gave a second thought as to whether this home really was worth the $224,000 being offered.

(Stay tuned for a brief aside on free market economics and why Phoenix real estate doesn’t necessarily apply.)

And so the bank accepts the offer at $224,000, with some closing cost assistance for the buyers included. And so the FHA appraiser goes out to the home and offers his opinion of the value of the property which turns out to be the only opinion that matters …

$184,000.

Oh, and the bank’s still paying buyer closing costs.

At this point, the bank could have told the buyer to take a hike but for reasons known only to them (and certainly, the idea that is was the “right” thing to do never entered into it), the bank agreed to lower its price to the FHA appraisal mark. Oh, and pay closing costs when it’s likely they could have found either a cash buyer or someone who didn’t need to be handed an additional $5,000 off the top.

The lender went for the highest offer and ended up accepting $3,000 net under list price.

This past week I had a buyer enter one of five offers on a home in Goodyear. We didn’t get the house. Why? As the listing agent put it, the lender accepted an offer so high “I don’t know how it’s going to appraise.”

If the offer’s bogus to the high side, if the buyer’s looking to be saved by the appraisal contingency, then why accept the offer in the first place?

And on a related note …

Not all lenders seem to have gotten the news that properties are moving quickly even if not priced well under the going market. There’s one neighborhood in Surprise where the REO agents keep going lower and keep selling homes in a 3-day span.

Wouldn’t it seem that if a home can be sold that quickly at price X, that it would sell just about as quickly … maybe a couple of days more … at X plus 1 percent? Especially when these homes are receiving multiple offers?

This would take some forward thinking, of course, and forward thinking rarely gets in the way of a motivated lender and an REO agent spending their next commission check.

Promised aside: Real estate is not a free economic market. Value is not solely the price at which buyers and sellers agree for the simple fact that they’re not the only parties to the sale, unless pure cash is involved.

Lenders have to decide for themselves whether they’re willing to accept the risk based on what buyers and sellers agree upon, which is why loans are based on the lesser of contract sales price or appraised value.

Just because someone’s willing to pay $224,000 for a $184,000 home doesn’t mean the bank has to provide the financing for a vastly overpriced purchase. Nor should they.

But with that in mind, one would hope the lenders selling these homes think like lenders when reviewing the offers that come in the door.

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