In today’s real estate market, it is more common to see buyers backing out of a contract. With short sales and foreclosures taking most of the inventory, there is no guarantee that buyers will get the home they bid on or how long the process will take. The time it takes for the buyer to hear a response from the bank sometimes steers them into another direction.
1. Investor Buyers: The current real estate market is filled with investors waiting to pounce on the “best deal in town.” They make multiple offers on short sales or foreclosed homes, then pick the home that gets accepted by the seller or seller’s lender first. Too bad for the other sellers who thought they had a willing and able buyer but later find out that the buyer has walked away. These sellers are left in the cold scrambling for a new buyer. On a short sale, finding a new buyer right away is required to beat the foreclosure deadline.

2. Inspection Period: Buyers are allotted 10 calendar days from the time the seller’s lender has approved the short sale or from seller acceptance. During this time, the buyer does his or her due diligence to investigate any concerns pertaining to the home, such as condition, square feet, schools, environment, zoning, termites, pests, neighborhood, and crime data, to name a few. A buyer may cancel during the inspection period if any of these concerns cause disapproval. Unless specified differently in the contract, the full earnest money is then released to buyer. However, the buyer cannot recover the cost of inspection and appraisal, if any.

3. HOA Restrictions: A buyer may cancel the contract within the cancellation period if he or she disapproves in writing any HOA rules or covenants. For example, if a buyer disapproves of the HOA rules forbidding basketball hoops in the driveway or pickup trucks to be parked on the street. Unless specified in the contract, the full earnest money is refunded to the buyer when he or she disapproves of any HOA rules.

4. No Sense of Need or Urgency: Many buyers. whether looking to downsize or move up into larger homes, already have an existing home. There is no sense of urgency for them to move out. They can stay in their home for as long as they want. These second-home buyers or investors are fine even if they don’t get the home. When a seller’s lender finally approves the short sale, it is possible for them to change their minds.

5. Financing Contingency: The contract is contingent on the buyer obtaining the loan. If, after a diligent and good faith effort, the buyer is unable to obtain loan approval, the buyer may cancel and all earnest money is released to buyer.

6. Appraisal Contingency: Completion of this sale is contingent upon an appraisal of the premises acceptable to the lender for at least the purchase price. If the home fails to appraise for the purchase price in any appraisal required by the lender, the buyer may cancel the contract and receive a refund of the earnest money — or the buyer may waive the appraisal contingency.
To minimize the risk of putting a listing “back on the market,” it is a good idea to ask as many questions as possible about the buyer prior to accepting the offer. For example, questions pertaining to other offers; their current housing situation; their reason for buying the home, or what the buyers liked about the home, find out if the buyer is well qualified to obtain the loan. It also helps to require a $500 to $1,000 non-refundable earnest money payment for 60-90 days to ensure that the buyer stays on during the short sale process. A primary resident buyer is favorable over an investor buyer. The former cares about the house while the latter only cares about the price. And if the seller’s lender counters with a higher price (which is likely) you are sure to lose your buyer. Back-up offers are great on investor offers. Even with these in mind, there is still a chance your buyer could walk away, but at least you’ve done your best to hold the home for what you thought was the “best buyer” given the day and time.

Our market today is filled with investors waiting to pounce at the best deal in town. There are Realtors who work well with investors and others who prefer not to touch them. To find out whether working with this type of buyer is right for you, here are a few tips on experienced investors.

1. Investors don’t care about the house, they care about the price - Investors make multiple offers to homes they have not even seen and hope that one of these offers will agree to their low ball price. It’s like throwing a dart at the map and hope that one of them sticks.

2. Investors are busy people or at least they pretend to be – These type of buyers don’t have the time to sit and talk about their goals and the process of home buying. They just want a good deal or they walk away.

3. Investors don’t value the time you spent helping them find a good deal. – All they care about are results and whether or not they purchased a “screaming deal”. Be weary of taking on an investor who you don’t know from Adam. Their loyalty is to no one but themselves. Unless, you have a lot of time to spare, these type of buyers could easily walk away and drain you up regardless of where you are in the home buying process.

4. Investors may have the cash but will not purchase - It doesn’t mean that because they have the cash, that they will purchase a home. It’s got to be the right one! Be ready to make a lot of low ball offers or show many homes and NOT get paid.

* To become successful in working with investors, be upfront about what to expect in today’s market. Be precise about what you expect from them if you were to help them with their investment purchase. If they agree to your terms, it will make the process go quicker and smoother. If they don’t, run away as fast as you can. Also, ask them a lot of questions about their past home search, pending offers, Realtor representation, proof of cash, employment and more to find out if they are worth your time and effort. There is nothing more frustrating than working long hours with a buyer and NOT get paid.

The Arizona Republic recently reported that the Chandler zip code of 85225 has the highest short sales in the SE Valley with 178 homes. This comes as a surprise since majority of distressed homes usually come from cities in the West side of town where housing development took place during the 2005-2006 real estate hype and most houses were overvalued.

The report explains that the high short sale figures in zip code 85225 was due to its fairly big area and homeowners taking out cash to buy a boat, investment property, pay off credit cards and more. Since home values tanked, many homeowners are upside down on their mortgage and took the short sale route to get rid of the house.

At present, the short sale count surpassed foreclosure homes. Successful short sales are increasing which means that there will be less foreclosures resultling from approved short sales. One can find a great deal at buying short sales if the buyer can wait and the short sale is approved by the seller’s lender.

For a full story click on http://www.azcentral.com/community/chandler/articles/2011/12/06/20111206chandler-zip-leads-short-sales.html?source=nletter-news

FHA Loan Limits Increase
Effective immediately, FHA loan limits are back to $346,250. They had been dropped to $271,050 in October. The max loan amount will stay at $346,250 until December 31, 2012. This change will apply to all FHA case #’s issued after November 18, 2011. An FHA case # is established by the lender at the start of an FHA loan. Conventional loan limits will remain at $417k

Interest Rates as of 12/8/2011 Rates based on a 200k Primary Residence Purchase or no-cashout refi (unless description below says differently), 740+ Credit, assuming 0% loan origination fee and 0% in buydown “points” (you can also choose to pay “points” and get a lower interest rate). Please note, this information is intended for Real Estate Professionals.

96.5% FHA 30 Year Fixed = 3.875% (Requires MI)
75% 30 Yr Fixed = 3.875%
80% 30 Year Fixed = 4%
95% 30 Year Fixed = 4% (Requires PMI)
97% 30 Year Fixed = 4.125% (Requires PMI)
80% 30 Year Fixed = 3.875%
80% 15 Year Fixed = 3.375%
80% 10 Year Fixed = 3.25%
125% Refi = 4% (No PMI, must be Fannie backed loan currently)
90% 2nd/Vacation Hm 30 Yr = 4% (Requires PMI)
80% Investment Property 30 Yr Fixed = 5%
75% Investment Property 30 Yr Fixed = 4.375%
100% USDA/Rural 30 Yr Fixed = 4.25% (No PMI required)
100% VA 30 Year Fixed = 4% (No PMI required)
80% 5 Yr ARM = 3.125%
80% 5 Yr Jumbo ARM to $1M = 3.75%
80% 30 Yr Fixed Jumbo to $1M = 5.25%

Contact Ryan at 602.793.7204 for any mortgage questions.

Note: Waiting periods vary depending on your reason for default, your current credit score, the down payment on the new home, your income, the type of loan and most important, the lender you select to do your new loan. Sometimes, one lender maybe able to approve you for a loan while another will not. To better prepare you in buying your next home after foreclosure, short sale or bankruptcy, it is a good idea to connect with a credit repair consultant and find out what it takes to improve your credit sooner. If you would rather get in a home sooner than the typical waiting period, you may look into “private financing.” Lenders who loan money this way do not have a “waiting period” like the big lenders do (Wells Fargo, Chase, Bank of America, etc.). Private lenders require at least 30 percent down payment and the interest rate is higher, at 11 percent or more. But you can close the transaction in two weeks. There is no prepayment penalty in most private financing, so you can pay off the loan sooner or refinance later with a regular government-regulated bank at a lower rate once your waiting period is over.

1. Low Prices - Home values have declined 45% to 85% from their heights. Most homes are selling for the price it sold in 2001 or prior. Arizona homes are on “clearance.” Some homes can cost less than a car. In the Queen Creek, Maricopa, West Valley and other areas developed during the real estate hype, newer houses are selling for $100,000 or less.
2. Low Interest Rates – Mortgage interest rates are down to an incredible mid-4% or better. House payments easily could be as low as car payments.
3. Special Loan Programs - 100% loan with zero down are available with the VA program for military members. Also the USDA program offers zero financing if the property is located in an assigned remote area. Restrictions apply; check with your local lender for details.
4. Rental Market is Strong - The rental market has appreciated 10-15% in the last six months. The rise in rental demand was fueled by homeowners who left their homes due to foreclosure or short sale. Many homeowners are not in a position to buy a home due to credit issue. Their best option is to rent a single family home and retain a lifestyle they are comfortable with. Location, nice neighborhood are key to finding a good rental. It is not a good idea to purchase a rental home base on the price alone.
5. Fix and Flip – Investors are cashing out on Fix and Flip projects. To become successful, one has to know the before and after value of the home to be flipped. Having a working knowledge on remodeling homes could save you time and money. Lastly, have adequate reserves to cover repair, maintenance, sale and miscellaneous cost. Certain areas do better with fix and flips and other others are better to hold and rent. Know the area well prior to purchasing a home to flip.

*** There are numerous reasons why investing in today’s market makes sense, as evidenced by investors dominating the homes sales. They know that the market offers opportunities for wealth and growth.

The Chandler Unified School District received an A grade overall based on the Arizona’s new grading system. This grading system relied significantly on Reading and Math scores taken during the statewide AIMS exam. Each school is given a label grade and a letter grade. The label grades are: excelling, highly performing, performing-plus, performing, underperforming or failing. The letter grades consist of A, B, C, D or F.

The Kyrene School District, known for its educational excellence for many years, missed the A grade by a point and landed a B grade this year. The Chandler Unified School District came out on top and continues to provide strong educational standards for families in the East Valley. Many Chandler residents support education. School initiatives passed easily through a Yes vote from residents.

The Chandler Schools’ performance is as follows:

Jacobson Elementary: A, Excelling
Ryan Elementary: A, Excelling
Basha Elementary: A, Excelling
Bahsa High: A, Excelling
Bogle Jr. High: B, Excelling
Chandler High: A, Excelling
CTA Goodman: A, Excelling
CTA Independence: A, Excelling
CTA Liberty: A, Excelling
CTA Freedom: A, Excelling
Chandler Traditional Jr. High: B, Excelling
Patterson Elementary: A, Excelling
Conley Elementary: B, Highly performing
Erie Elementary: C, Performing Plus
Frye Elementary: C, Performing
Galveston Elementary: C, Performing Plus
Haley Elementary: B, Highly Performing
Hamilton High: A, Excelling
Hartford Elementary: D, Performing
Fulton Elementary: A, Excelling
Hull Elementary: B, Excelling
Andersen Elementary: C, Highly Performing
Andersen Junior High: B, Performing plus
Know Elementary: C, Performing plus
Humphrey Elementary: C, Performing
Navarrete Elementary: B, Highly performing
Perry High: A, Excelling
Riggs Elementary: A, Excelling
Tarwater Elementary: B, Excelling
Bologna Elementary: C, Performing
San Marcos Elementary: C, Performing
Sanborn Elementary: C, Highly performing
Santan Elementary: A, Excelling
Santan Jr. High: B, Highly Performing
Shumway Elementary: C, Performing plus
Hancock: A, Excelling
Weinberg Elementary: B, Highly Performing
Payne Jr. High: A, Excelling
Willis Jr. High: C, Performing plus

* Schools with a majority of families in higher income levels mostly performed at A, Excelling, while schools with a majority of families in the low income level performed fairly. When looking for a place to live or a home to invest, the school system is a key factor that home buyers look for in choosing a home. Aside from location, lifestyle and community services, surrounding schools somehow determine the length of time a family stays in their home. For the Arizona Republic’s complete article on the school grades, go to http://www.azcentral.com/community/chandler/articles/2011/10/14/20111014chandler-school-grades-high.html.

The overall median prices in Maricopa County showed mixed results with some areas increasing and some decreasing in values. The following are the details of the report by Chandler Republic on October 8, 2011 issue.
Zip Codes with increase of 10-20%- 85383, 85305,85263
Zip Codes with increase of 20% or more-85262
Zip Codes with decrease of 10% or more85050,85304,85029,85051,85020,85006,85008,85281,85040,85204

The report further states that in the SouthEast Valley, the zip code 85204 in Mesa has the biggest decrease in overall home value.

The zip code with the most sales is 85249 in Chandler.
The zip code with the highest overall median is 85284 in Tempe.
The zip code with the biggest decrease in resale home value is 85281 in Tempe.

The message this report tells us is, home values are local and home values could vary from one neighborhood to another neighborhood. Not all prices are falling in Arizona. There are some that are appreciating in value, some stable and some declining. When asked, how’s the real estate market? A good and truthful answer is, “It’s mixed.” One could go even further as saying it depends on the area, price range of the home and the type of sale (short sale, lender-owned, regular sale, new construction.) It’s always never thesame across the state and nationally.
So, be careful where you get your figures. National figures does not reflect Arizona figures.

1. Home that Backs out to a Busy Road – When it comes time to sell, this home will sell last for 10-15% less than the other homes in the neighborhood. It is a inherited problem that you cannot change.
2. Very Small Backyard or NO Backyard – Most buyers would like a decent size yard for their pets to roam, kids to play or entertain guests. Unless it is a condominium, a good size yard or bigger yard adds to the value of a single family detached home and is more marketable.
3. Homes with one Bathroom less – Most buyers would like 2 Bathrooms for a home that has 2 or 3 bedrooms. A 4 or 5 Bedroom home is expected to have at least a 2 baths for a one story home and 21/2 baths for a two story home. Anything less than this would require bathroom addition that can be costly. You can certainly get more house if you drive farther.
4. Do It Yourself Projects Gone Wild – Many homeowners try to save money by doing home improvement projects themselves. In some cases, the workmanship is inferior and or unfinished. It will be costly and twice the work for the new homeowner to correct the mistake and to redo the home to a level that is tastefully done.
5. Funky Layout – An open floorplan is a popular layout liked by many buyers. On the other hand, a choppy floorplan with many walls dividing the rooms is a waste of space and makes the home look smaller than it really is. If you own a home built in the early decades, it maybe a good idea to tear down some non-bearing walls to make for a bigger home.
6. Mold – Existence of mold that is significantly present in a large area or wall is costly to repair and maybe viewed by potential buyers as a health hazard. The price has to be reduced significantly to sell.
7. Swimming pool Backyard – A backyard that is taken up by a swimming pool and nothing else is a hard sell. Most buyers would like a pool with a decent size grassy play area to make it a fun place to entertain. A grassy backyard is more desirable than just a swimming pool backyard or a desert landscaping backyard. However, a rock landscaping is appealing to investors looking for minimal maintenance.
8. Home that backs out to Commercial, Industrial or low income neighborhoods – Home buyers perceive this as an eye sore or unsafe.
9. Home located next to a huge power structure – Home buyers look at the power structure as a health hazard that could develop cancer. Although, studies may prove otherwise, buyers don’t really care to know because there are many other homes that don’t sit next to a huge electrical pole. It may also be viewed as an eye sore by many buyers.
10. Bad Neighborhood – Due to safety reasons. Every buyer would like to live in a nice neighborhood with low crime and where people maintain their homes . You can always change the house, but you cannot change the neighborhood.
11. Homes with significant cracks and foundation issues – Be prepared to sell this home at clearance price. The home can shift as the crack continues to extend. Be sure to consult a residential engineer , builder and other resources before buying this home. You may get it for a darn cheap price but the headache that comes with it might be more costly than you paid.
12. Flood Area – Homes located in a flood zone will require a flood insurance. Flood zones are classified into different levels. The good news is, Arizona does not rain as much. Consult the flood department to find out the details on flood restrictions and flood history of the home.Of course, in any real estate investment, location comes with a price. The closer you are to the city, the dollar per square foot of the home increases. As you move further out into the remote areas, the value depreciates.