How can appraisal account for wild swings in home values?

The COVID-related fluctuations in Valley housing prices, marked by a huge downswing in March and culminating in unprecedented increases in June and July, are cause for paying extra attention to home appraiser practices, according to a Phoenix appraiser.

During a ZOOM webinar with local Realtors this week, appraiser Jay Josephs said these “dramatic fluctuations can cause panic in the appraisal industry” because of the recent wild swings in prices paid for home in the Phoenix area over just the past five months.

Josephs said that in March, before COVID-19 affected the marketplace, Metro Phoenix had about 8,900 sales for the month, and the average price per square foot for a home was $231. In April, home sales dropped 19 percent to 7,180, and the price per square foot dropped 8 percent in that one month.

In May, 7,028 homes were sold — a 2 percent drop, while per-square-foot prices plummeted 16 percent to $181, Josephs said. 

Then in June, a rebound to 9,719 homes sold — up 38 percent — with per-square-foot pricing at $197.

“We didn’t think the rise would be that dramatic or fast,” Josephs said. “How does an appraiser account for these changes?”

Josephs told Realtors that when representing a home seller, it is important to meet with the appraiser and provide information about the property they may not otherwise be aware of. He encouraged agents to work with sellers to provide a year-by-year listing of important improvements or remodels to the property, to ensure the appraisal is fair and can justify the selling price. In addition, it is a good idea for Realtors to determine the geographical competence of the appraiser and discuss comparable properties or share details of comparable homes that are significantly low or high.

“Arizona and Maricopa County are positioned really well to come out of COVID from a real estate perspective,” Josephs said. “There is a gravitation from higher- to lower-density markets, and a release of pent-up demand — I just didn’t expect it in June. Our market is thriving.”

July 21, 2020 at 12:56 pm Leave a comment

Legal advice offered on fix-and-flip properties

If you plan to sell a home after renovating or remodeling it — commonly known as a “fix-and-flip” property — a Valley lawyer recently offered a few tips on ensuring you don’t entice a lawsuit from the buyer after the sales contract is signed.

Attorney Patrick MacQueen, a 16 year veteran real estate lawyer of Macqueen and Gottlieb, PLC told a webinar audience this week that he has handled about 235 cases involving fix-and-flips in the past four years, accounting for approximately 40 percent of his client caseload.

There are five major allegations a buyer can accuse the parties involved with the sale, MacQueen said. The first is “common law fraud,” meaning an “outward statement” about the property’s condition that is “an out-and-out lie.”

The second is fraudulent misrepresentation is “fraud by omission,” MacQueen said, such as when a question about the property comes up, but the seller or seller’s agent “fails to say anything” despite a known problem with the home with respect to the question. Such can be the case of non-disclosure of mold in the property.

Third is “Consumer fraud” typically has to do with statements or representations made in advertising materials, MacQueen said. “For example, if the MLS listing says the home was a ‘complete remodel’ but not everything was redone,” he explained.

The fourth is “Negligent representation” which involves a statement made to the buyers about the subject property that you didn’t know was false, and the buyers relied on that information. For example, if the seller tells the buyer all needed permits were obtained in the construction of a major addition but one necessary permit was never granted, that would be negligent representation, MacQueen said.

MacQueen said he also sometimes sees breach of contract claims filed against sellers if a claim made by the seller in the signed contract is found to be untrue.

MacQueen said the best practice in selling a fix-and-flip property is to avoid adding superfluous “as-is” statements in the sales contract, because standard Arizona real estate contracts already include a standard as-is language.

Further, MacQueen urged that sellers “disclose what you know” in the Seller Property Disclosure Statement (SPDS) that is typically included in a sales contract, rather than try to avoid using the SPDS when they are selling a property they never occupied.

“Disclose everything,” when selling a fix-and-flip property, MacQueen concluded.

For a Buyer purchasing a fix-and-flip property, MacQueen offers advice. Conduct a third party inspection, request contractor information, warranty, receipts and confirm verbal representation via email through your Realtor. So, when the Seller claims that the contactor who completed electrical repair is licensed, have this confirmation in the form of an email.

Following these tips could reduce the risk of facing a potential and costly law suit.

July 14, 2020 at 4:26 pm Leave a comment

What does Woodside Homes LLC offer that other builders don’t?

The answer: A frame walk through. The frame walk through is an added value that buyers get if they purchase a home from Woodside Homes LLC at Heritage Crossing in Mesa, AZ. It is conducted by the field supervisor with the buyer, and agent if applicable. The supervisor goes over every aspect of building the electrical, mechanical, plumbing, cooling and heating, sewer, foundation, grading, etc. of the interior and exterior of the home prior to installing drywall.

I recently had an opportunity to witness this walk through with a client, which so many builders do not provide. It gave my client and myself an idea of what is hidden behind the walls and gives us a good feeling that the builder is being transparent about how they construct your house.

Angela, the field supervisor, walked us through the entire house and found a few items that needed to be fixed. She immediately contacted her workers and the job was completed even before we finished the walk through. That is great service!

A frame walk through is similar to what a third-party inspection does. With Angela’s competent guidance, it gave my client the assurance that Woodside Homes LLC strives to do their best to build a great house for their client.

My client will be closing on the home in a few weeks and so far Woodside has been communicative and coordinated in providing my client the information they need to close on the new home. Builder representative Susan Collins kept us informed and delivers high quality customer service.

In addition, unlike many builders with one lender, Woodside Homes LLC partners with four different lenders, which allows the buyer to shop around for the lender that best fits their needs.

Currently, homes are going fast at Heritage Crossing by Woodside Homes LLC. Their Landmark development can sell only four lots a month and their Village development can only sell nine lots a month. Both developments have waitlists, since they both exceeded their lot quotas because of early demand. Insane!

July 5, 2020 at 2:44 pm Leave a comment

Valley real estate demand as hot as ever following COVID19 pause

Residential real estate in Metro Phoenix continues to be in an affordable range, and prices are likely to appreciate over the next five years given the current economy and demand, according to recent remarks by a local real estate analyst.

During a June 25 ZOOM webinar, Tina Tamboer, senior analyst from local real estate statistical analysis publication The Cromford Report, reported that historic low mortgage interest rates are helping Valley homes continue to be affordable for buyers, even though the supply is low and prices are up.

For example, she said, the selling price of a 1,500- to 2,000-square-foot home in the Valley is up an average of $50,000 compared to last year – but mortgage payments are roughly the same for buyers because of the low interest rates.

Tamboer said the Phoenix area market is still affordable for homebuyers with an average income ($72,000); the normal range of affordability is between 60 and 75 percent, and Phoenix is currently at 63 percent. (Nationwide, affordability is at 61.3 percent, she noted.)

However, affordability is declining, Tamboer said. “If incomes do not rise with pricing, we may become below normal in affordability.”

Therefore, she added, “buyers need to buy now. No price declines are coming.”

Supply of homes for sale in the Valley are down 11 percent since the start of the Coronavirus shutdowns, and also 13 percent lower than June 2019, Tamboer added. 

“Demand is shooting up, but there is no surge in new listings,” she said, adding that the supply of homes in the $200,000 to $250,000 range is down 61 percent from a year ago.

July 2, 2020 at 3:41 pm Leave a comment

Ibuyers offer “Convenience”, but at what cost?

We’ve all seen or heard the ads, because they’re everywhere. 
 
Opendoor, Offerpad. Zillow — all “iBuyer” companies that want potential home sellers to bypass the traditional sales process and accept their cash offer in the name of “convenience.”
 
My first thought about all these ads is that a lot of money is being spent to get all that attention. Think about some of the other categories of goods and services that blanket the airwaves with advertising: Automobile manufacturers and insurance companies come to mind — two products that are very expensive for consumers at least partly because of these corporations’ big marketing costs. 
 
These iBuyer services purport to be the quickest, most convenient way for a person to sell a home. According to a representative from one of these companies who spoke at a recent local real estate continuing education session, a prospective seller can contact the company, send them some photos, and they will respond promptly with a cash offer based on what they say is a proprietary formula — which includes a look at what similar houses have sold for recently.
 
If you, as a seller, want to accept that offer, the company sends a member of its staff (not an appraiser, not an independent inspector) to assess the value of the home first-hand.
 
Any repairs or other issues that need mitigation will be reported back to you, along with a choice: Let the companies’ contractors come in and, for example, fix a leak in the roof or the toilet — at a deduction to your offer price — or have contractors of your choosing make the repairs and show proof of satisfactory completion.
 
As for convenience, this particular company charges all home sellers a 1 percent “convenience charge.” Yes, that’s exactly what they call it. 
 
That’s on top of a buying agent commission ranging from 2.5 to 3 percent; 0.1 to 0.2 percent “listing costs,” and a range from 2 to 6 percent for “holding cost and risk.” The company’s “cap” on the total fees charged to a seller, it was noted, is 14 percent.
 
Fourteen percent. Compare that to the typical and negotiable 6 percent commission a Maricopa County home seller will pay to have his or her property actively marketed and listed by a Realtor. So, for example, on a home sold for $280,000 — the current median home price in the Metro Phoenix market — the 6 percent commission would be $16,800. If a homeowner’s fees to sell to one of the iBuyers reached 14 percent, the cost would be $39,200. That’s a $22,400 premium for a “quick” sale in a market that has rarely seen quicker turnaround than exists today.
 
The reason the market is currently seeing quick sales transactions in general is that the Phoenix real estate market has a very low supply of homes available, as well as heavy demand — Arizona’s population growth is the fastest in the nation, up 2.21 percent to climb to over 7.1 million residents last year. 
 
That high demand means homes are sold more quickly — current average days on the market, according to the Cromford Report, is 56.48 days — the fastest since August 2013 (58.73 days on average). More proof: On Oct. 1, 2019, there were 17,535 active listings on the MLS. On the same date a year ago: 20,292 listings. In 2017: 21,804 active listings.
 
What does this mean to prospective home sellers who are trying to decide between contacting an “iBuyer” program or reaching out to a Realtor with a fiduciary responsibility to work diligently on clients’ behalf to market and promptly sell their home at the best possible price? 
 
It means looking up a local Realtor before contacting one of the “iBuyer” companies would be a very wise move.

October 5, 2019 at 6:52 am Leave a comment

2019 Arizona Real Estate Market Update and predictions

I attended a class on real estate recently and listened to Bill Grey, ASU professor on real estate and very well informed on past and current issues.  He mentioned many interesting views about varied subjects that affects the future of Arizona which I will share with you.  Many of which we take for granted.

  • Arizona private land ownership is rare: 43% of AZ land is owned by the Federal Government, 26% is owned by Indian reservation, 12% is owned by State of AZ Trust to build schools. So, only 19% is owned by private citizens like us.
  • Arizona home ownership: Sixty five percent can afford to own a home. This is a drop from 75 percent from years ago because mortgage loans are tougher to get.
  • Arizona home sales: Looking bright. Many people are moving to AZ from California, Utah, Colorado, Washington because of low cost of living, jobs, weather and quality of life.
  • Rental Market in Arizona: Booming and rent is increasing. A legislation to cap rental increase would help.
  • Arizona median Age: 35.5 years old
  • Arizona unemployment rate: 4.3 percent
  • Arizona median income: $56,000
  • US median home income: $60,000
  • US median home prices – $250,000
  • AZ population: 1.7 million , growth rate is 1 million  per 10 years
  • AZ largest employer: Banner Health Care
  • Retail market prediction: Malls without experience will close and convert to medical offices, restaurants. Dollar store, 99 cent store, Goodwill are gaining demand. Middle American stores like Macy’s, Penny’s are struggling. Luxury stores are doing well.
  • Industrial Market: Many distribution hubs are staying or moving to AZ because it is cheaper – Dicks, Ace etc…
  • Entertainment centers are gaining success. Customers are looking for fun experience such as top golf.  Golf courses are on a decline.
  • Challenges facing Arizona: Lack of water, huge national debt, available land, education.

 

*Information and figures provided were based on March 18, 2019 and are subject to change.

March 23, 2019 at 12:56 pm Leave a comment

What would you do if the house you made an offer on was used to shoot porno films?

A couple rescinded their offer on a Paradise Valley home after they found out that the house was used for pornographic films.

What are the porn laws in Arizona? When selling real estate, the Seller is not obligated to disclose the type of business the house was used for. Other items that are not required to be disclosed in Arizona when selling a home are as follows:

The home being the site of a natural death, suicide or homicide or any other crime classified as a felony.
The home being owned or occupied by a person exposed to HIV or AIDS.
The home being located in the vicinity of a sex offender.

The Buyer has the right to cancel within allowable time frame due to their inspection or morale standard but Arizona law doesn’t prohibit the sale of the house regardless of its past. It will just have to wait for the right Buyer.

 

March 10, 2019 at 1:58 pm Leave a comment

Is Selling a home through Offerpad or Opendoor better than hiring a Realtor?

For many months in the Phoenix metro area, alternative services to real estate agencies and Realtors  like OfferPad and Opendoor have been aggressively advertising and promoting their alleged advantages to selling a home “a different way.”

I recently visited  one of these websites to find out how much they would offer to purchase my own house.  As a Realtor, I have a strong sense of where my house should be priced at to sell. The resulting offer was a price about $10,000 lower than what I would sell my house for in today’s market.

However, that wasn’t the end of the story. On top of the $10,000-below-market-value offer, the service deducted 9 percent from its offer price to be applied towards their holding costs (utilities, HOA fees, and maintenance) until they sold the house to another buyer, and also covering their sales commission to sell the house, plus other miscellaneous administrative costs.

Finally, in addition to the holding costs, the service noted that it would deduct repairs or replacement costs after an inspection. These items included, but were not limited to, the air conditioning unit, roof, water heater, appliances or structural flaws.

Will customers receive more money for the sale of their house if they go with one of these services instead of selling the home the traditional way by hiring a Realtor? Below is an example that shows the comparisons:

                                                         Alternative Home Buying Service            Realtor

Sale Price                                             $360 ,000                                                              $370,000

 

Commission/holding cost/           -$32,400 (9%)                                                     -$25,900 (7%)*

Closing cost deductions

Repair/Replacement cost             -$2,000 (estimate)                                           -$1,000 (estimate)

Net Profit                                            $325,600                                                              $343,100

Difference in Gain                           – $17,500                                                              +$17,500

In summary, hiring a Realtor to sell a home in my area would result with the homeowner pocketing well over $15,000 more than using the alternative service.

However, for some sellers, the convenience of selling their house “as-is,” not having to show the house to buyers or waiting for a buyer to make an offer, plus the sometimes lengthy closing process may be enough reasons to justify the a more than $15,000 reduction in profit.

Like any investor, OfferPad or Opendoor will give you less money in exchange for convenience.  The choice is yours.

 

May 5, 2018 at 11:13 am Leave a comment

What you need to know about buying a new home with Taylor Morrison

My client recently went under contract with one of Taylor Morrison’s homes at Adora Trails in Gilbert. My client wanted to schedule a third-party inspection prior to drywall. This is within the buyer’s rights with new construction homes, but is often not mentioned by builder’s representative.

I quickly contacted Taylor Morrison’s sales representative to get the inspection scheduled as soon as possible. But, unlike with most other builders, it was not that easy. Taylor Morrison requires 30 days’ advance notice of the buyer’s intent to schedule an independent home inspection to the seller’s customer care representative. Taylor Morrison also requires that the independent inspector provide proof of liability insurance coverage of at least $1 million.

The sales representative mentioned that it would take a few days for Taylor Morrison to get an approval and discouraged me from continuing to pursue the independent inspection because of the lack of time before drywall installation. He also mentioned that Taylor Morrison takes pride in quality work. Also, I was told there is NO assurance that they will fix any items listed in the independent inspection.

I shared this information with my client and he decided to waive the third-party inspection. I’m disappointed that Taylor Morrison didn’t do more to accommodate my client’s request.

This incident reduced my level of trust in “America’s Most Trusted Home Builder.” How can you trust a builder who doesn’t help a buyer complete their own independent inspection? It makes you wonder what they are hiding.

I understand that Taylor Morrison doesn’t want to delay closing a sale, but in this case, even though construction seemed ahead of schedule and they had time to allow a third-party inspection, it felt like they didn’t want to accommodate or bother with it. My client closed on the home ahead of schedule. Other than this request, he was happy that all other aspects of the sale went smoothly.

On the other hand, Lennar Homes at Layton Lakes allowed two of my other clients to complete an independent inspection with short notice. Lennar Homes fixed the items identified by the independent inspector, including an accidental leak that occurred at time of inspection, and my client was happy.

The next time you shop for a new home, have your Realtor ask the builder about their independent inspection procedures. You’ll find that one builder may be more flexible than another. And the peace of mind of having an independent inspection is priceless.

April 21, 2018 at 10:15 am Leave a comment

Why is the Listing Agreement Important When Selling Your Home?

by: Maria Hass, Chandler and Gilbert Realtor

listing-agreement

A seller in her senior years approached me wanting to relist her house with me. She is not happy with her current Realtor from Keller Williams. She showed me the listing agreement, and to my surprise, the listing agreement expired more than a month and a half ago, but the Realtor didn’t inform the seller and continued to conduct open houses at the seller’s house even though they were no longer authorized  to market the house.
I talked to the listing agent and she said they had a verbal authorization to continue listing the house past the listing’s expiration date.
Whether or not this is true, EVERY agent should know that a verbal agreement does NOT change any terms of the written agreement. Everything has to be in writing.
In addition, the listing still shows “Active” in the MLS indicating that the listing end date entered by the Realtor in the MLS was not the same date that was agreed upon in the listing agreement.  Otherwise, the listing status would show “Expired” a month and a half ago.
The Seller has the option to pursue a code of ethics violation with the Arizona Department of Real Estate, an MLS violation for dishonest conduct and incorrect entry and an appropriate fine could be sanctioned against the Realtor.
What is the moral of the story?
1. Read the listing agreement before signing — Ask the Realtor to send you a blank copy of the listing agreement a few days before you meet so you have time to read the terms and conditions and ask any questions before signing.
2. Know your listing period by heart and mark it on your calendar.
3. Ask for copies of ALL the documents you signed showing your signature, not just a blank copy. This way you have a copy of the executed agreement.
4. Know your right to cancellation. The Arizona Association of Realtors (AAR) listing agreement, which is the standard form used by Realtors for resale homes, gives the Realtor a “unilateral right” to cancel. But it doesn’t give the Seller an automatic right to cancel. So, every Realtor has different terms when dealing with seller cancellations. Some Realtors charge a $500 upto $3,000 marketing fee to release the seller from the listing early. Other Realtors don’t charge anything to cancel.
Find out the Realtor’s cancellation policy before you sign.
5. The listing period varies by Realtor. It can be anywhere from two months to a year. The longer the listing, the longer it takes to get out of it if you are unhappy with your Realtor. A six-month listing period in Arizona is standard.
Protect yourself by taking time to read the listing agreement. Once you sign the agreement, you are bound to follow the terms of the contract.

February 23, 2017 at 1:18 pm Leave a comment

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