Arizona

To say that I was very concerned about the condition of the bank owned homes that I would find in Queen Creek during my initial tour Sunday is an understatement. I was honestly scared to heck that property condition would be so bad that my newest client would get soured on the prospect of buying a home in the area, and resort to renting. Still, I’m not easily daunted (and fortunately, neither is she), so we set out on our first tour together of homes priced under $125k, with a reported 4 bedrooms, 2 levels, and bank owned in the town of Queen Creek.

Our tour comprised just 8 properties this first day. As luck would have it, the first home was the worst of the bunch. In an ideal world, you always save the best for last, but I also like to front load with something tantalizing anyway. Unfortunately, I missed the mark on that. There was so much wrong with the home, I’m not going to begin to describe it.

Subsequently, however, home condition wasn’t as bad as I feared. For whatever reason, the bank owned homes look better than Chris Butterworth found in Litchfield Park recently. Half of the homes did have at least one missing major appliance (either a stove or a dishwasher). All of the homes needed at least some repainting done and all of the homes needed the carpets to be cleaned. A couple of the homes had had some landscaping work recently done to get the yards at least respectable, probably due to the HOA’s. What surprised me the most was that none of them smelled bad. Naturally, only a couple of them had the power on. It seems $10/month is too much for these banks to afford so that you can look in the garage or a powder bath with some light. Next month, when daytime temps consistently blow past 100 degrees, having the power off, and no A/C at all, will make any afternoon showings nearly intolerable.

Unfortunately, none of the homes we looked at actually had 4 real bedrooms. Instead, all had 3 bedrooms and a loft, thus each of these listings suffered from rules violations in our MLS. Personally, that was certainly annoying, although my client was satisfied, as the loft works for her needs of an “office” in the 4th bedroom. One of the homes had a loft and a den, which was the closest thing to being accurate that we saw.

I was unable to gain entrance to one of the properties on our list. It had the spin-alphabet lockbox, but no combo was noted in the listing. A call into the listing agent yesterday has yet to be returned, and thus the 237 days on market is not very surprising. I have to believe this bank is getting what it paid for.

As advice for the banks, I very much concur with Chris Butterworth: make the property condition nicer. The prices are indeed tempting, but if the banks improve property condition just a tad, any buyer objection becomes completely mute. For many of the homes, ensuring the carpets were cleaned (thus removing doubt about whether they need to be replaced), all appliances were present and working, and all cabinets doors/drawers were present and working would have made a huge difference. These improvements would ensure the buyer, short on cash to begin with, has a home that is move-in ready. I know the banks want to price these problems into the home, but they did so with varying degrees of success.

I think most buyers can look past the painting problems, and I wouldn’t advise banks to address painting problems. Paint is certainly an area where most home buyers feel they can do it themselves.

The one area where I think the banks are seriously missing the pricing mark, was in regard to the homes that had vinyl flooring. My client was really turned off by all of these homes, as the expense of putting in tile, coupled with the fact she couldn’t do it herself, made each of them complete deal breakers. A home with vinyl flooring must be priced substantially lower than a home with tiled flooring for them to be comparable.

Finally, it’s the saturation of bank owned properties in Queen Creek that allows me to be so critical of property condition. The Lending Tree adage of, “When banks compete, you win” would appear to be very much a reality for buyers considering a home in Queen Creek today.

Yesterday my newest client met me in my office to discuss her desire to purchase her very first home. She’s a brand new school teacher, and will be working near San Tan Heights in Queen Creek as an 8th grade science teacher next fall. She’d like to move in during the month of June, so she has some time to deal with any house issues before school starts. She’s as motivated a buyer as I’ve worked with in some time, and honestly, it was very refreshing to meet her and feel her energy and excitement during this initial meeting.

Looking in MLS, I searched for any 4 bedroom home, 2 story, that was for sale in Queen Creek for under $125,000. I advised her, that given her timeline, we’d want to avoid any short sale listing, as it was unlikely we could get her moved in before the end of June. This first search resulted in 36 homes for sale, matching that basic criteria, but ignoring the exclusion of bank owned or lender approval necessary. That was a welcome find, so I dug in to find which of the 36 homes were owner occupied, non-short sale, which would allow us the easiest negotiation.

In an ideal world, finding a non-short sale, non bank owned listing would be easy to do. You’d enter the appropriate search criteria, since our MLS includes fields for “lender owned property” and “lender/creditor approval necessary”. Naturally, at least 1/2 of the 36 homes were incorrectly entered, eliminating any hope of an automated search. One home was even noted as a 2 story home, when in fact it was a 1 story ranch.

So we muddled through the 36 homes looking for the hidden gem (or preferably gems), that was owner occupied, in good condition, and not a short sale. We found: NONE. Digging a bit deeper at just a few of the listings the reason there were no owner occupied homes at this price point became abundantly clear. Nearly every home being offered in this price range was originally purchased just a couple of years ago for more than double the current list price. Purchase prices of $250k and up were not uncommon. And then add to that further improvements like pools, landscaping, window coverings, etc., and true cost was even higher.

The majority of my business is in North Phoenix and North Scottsdale, and while I knew that Queen Creek was getting hit hard, finding greater than 50% valuation declines stunned me. It also explains why there aren’t any owner occupied homes for sale in this price range. How many owners would have the equity position to compete with these bank owned or short sale properties? A very, very limited number.

An agent that works in Queen Creek asked on Trulia Voices a while back, when other professionals think Queen Creek will bounce back? I replied 5 years from now. Looking back, I very much underestimated that. If the bottom of the market were today (which I don’t believe it is), and Queen Creek began appreciating at 5% annually (approximately the Phoenix average over the last 30 years) for the next 5 years, only 34% of the loss would be recovered. At a 5% growth rate, it will take until sometime in 2022 for those $250K sales prices to return. If the growth rate were accelerated to 6%, it will still take until 2020, before those $250K sales prices return. And again, those dates assume the bottom of the market is today and that Queen Creek performs equally well to greater Phoenix, which are two assumptions I’m not ready to assert.

Author’s note:  This post was primarily composed at 9am…but due to a hectic day, it’s finally being published after 8pm.  Hopefully the D-Backs held on the to the win.

The Arizona Diamondback’s home opener is today, with first pitch around 6:40pm against the LA Dodgers.  Opening day is always a thrilling day for a baseball fan.  There’s optimism that the team will perform well and hopefully make the playoffs, coupled with the excitement about seeing new players and/or coaches along with (potentially) old favorites. 

Today, the Diamondbacks will run Dan Haren out on the mound, which gives fans a chance to see the biggest off-season acquisition in person.  A blown save kept him from his first win as a D-Back.  Hopefully Dan pitches well again, and the team is able to get him his first Arizona win today in front of his new home town fans.

You may wonder why I write about the local sports teams here on my real estate blog.  Obviously, a big part of the reason is that I’m a huge sports fan myself, particularly of the Suns, D-Backs and Sun Devils.  But another reason, is that I grew up in rural Oregon (moved to Phoenix in 1986).  Portland was 200 miles away, where there was only one professional team and the University of Oregon and Oregon State were even further away.  As a result, professional and collegiate sports were something I had limited exposure to.  But here in the Phoenix area, residents are exposed to each of the big 4 sports, along with a big time collegiate program.  And while every sport doesn’t have a powerhouse team, having any team at all exposes us to media coverage (beyond ESPN) other parts of the country don’t necessarily get.

Thus, if one of the reasons you are considering a move to Arizona happens to be the college/pro sports scene, I think there are many, many cities where you could fair worse, and only a couple of cities where you could arguably say is better than Phoenix. And if you are only a minor sports fan, like I was when I moved here, consider the sports scene here an added bonus, that over time, may be more than just a bonus.

The Arizona State Sun Devil men’s basketball team lost to Florida last night in the 3rd round of the NIT to the Florida Gators and thus ends their season.  I want to congratulate the players and coaches for an excellent season.  The success the team had this year far exceeded almost everyone’s expectations, and regardless of how the tournament selection process ended, I think they were the best college basketball team in the state of Arizona.  The team’s performance in the NIT did nothing to detract me from that thinking.

I’m really looking forward to next year.  As an aside, you have to really be happy to be a Sun Devil fan right now.  The baseball team is #1 in the nation, the football team went to a bowl game, and the basketball team was in post season play.  Not to mention track & field, women’s basketball, it’s just a great time to be a Sun Devil fan.  Clearly, Arizona State University athletic director Lisa Love is doing something right in Tempe.  Fork ‘em Devils!

Last week, a client of mine sent me a letter in the mail addressed to “Steve Belt, GRI”.  It made me go, “hmmm.”  It made me think this client probably didn’t know what GRI meant, or why it was next to my name.  I’m a bit proud of the GRI designation, which is why it appears next to my name.  However, I rarely bring up the designation, thus I’m sure the majority of my clients (and not just her) are uncertain what it is or why they should care.

The GRI designation refers to being a Graduate, REALTOR® Institue.  To earn this designation, primarily all you need to do is attend a bunch of real estate classes and pass the test that is at the conclusion of each class.  Nearly 140 hours worth of classes and 10 tests.  And the 140 hours will take at least 16 full days to complete.  On a fast track, getting your GRI will take at least 2 months.  As a reference, in pre-licensing, you only need 90 hours to get your license in Arizona, and you can get that done in 2 weeks. 

The benefit of the GRI program is that the classes have content that will help you as a real estate agent, not classes designed to help you pass the State licensing exam.  The questions on the state licensing exam are primarily filled with real estate trivia that in truth rarely comes up in my day-to-day.  I’m glad to know that there are 43,560 feet in an acre, but to be honest, knowing there are approximately 45,000 feet in an acre is far more useful.  That’s the difference between the GRI and pre-licensing or post-licensing continuing education.  You get useful information.

As an example, there’s an 8 hour class on property management for property managers.  I took the first offering of that class when they were beta testing it, and I was thrilled with the experience and knowledge of the instructor.  The lessons I learned in that class continue to prove useful for me today, and without the learnings from that class, I doubt I could be a successful property manager.

As another example, there’s a 2 day finance class, that has excellent info on VA and FHA programs.  I remember taking the class thinking the information wasn’t and wouldn’t be very useful, because sellers weren’t willing to agree to the conditions to support a VA or FHA buyer.  That was 4 years ago.  Fortunately enough of it sank in, because it’s very useful and practical today.

Agents that have the GRI designation, due to the relatively high time cost to taking all of the classes, are agents that are clearly investing in themselves as a means to provide better service to their clients.  The GRI designation doesn’t indicate productivity or years of experience or even just “buying your way” to a designation.  It’s one of the few designations that takes a bit of work to complete, and I think equally importantly, yields real benefit to those that have completed it.

If you are curious about other designations that agents may have in Arizona, you can find a list of the alphabet soup designations here, on Arizona’s Association of Realtors website.

Ok, here’s my open admission that I’m a Starbucks addict.  Most days I get my regular:  Decaf, grande, extra hot, with whip, mocha for Steve.  I justify the habit by calling it “networking”, which to some extent it is, but honestly, it’s a lot more about the chocolate syrup in the mocha.

At any rate, today I was surprised when a hand written note on the door said today Starbucks would not be taking CASH, only credit cards and Starbucks cards.  Inside the store, inquiring minds had to know.  The culprit:  the safe didn’t understand February 29.  With no way to get into the safe, there was no place to put/retrieve the money.  I thought to myself, “I think that’s illegal…you have to accept cash”, but I just paid with a card anyway.  Another customer handed over $2 for his grande drip, and was given the coffee at no charge.  I think the employees know it’s illegal to decline cash as well, so when the issue was forced, they did the right thing.

As I read the paper, I noticed a few people would read the sign and then leave, never venturing inside.

Looking for how this relates to real estate?  While no one can be forced to accept all forms of payment/financing, with current market conditions, a seller would be crazy not to accept any and all forms of legitimate financing.  Whether the buyer will be using conventional financing or cash, FHA or VA, now is not the time to be picky.  Sure FHA and VA are going to impose costs on the seller.  Explore those costs at the time of the offer, and if necessary, counter-offer appropriately.  If your property is listed for under $200K (take note of this positive article in the Arizona Republic today about properties under $200K), you should darned near expect an offer from an FHA or VA buyer.

As well, as a property seller, if you are in a position to enable it, you should absolutely announce that you would consent to seller financing.  Seller financing, in this market, will get the phone ringing.  As more and more people are being forced from their homes via foreclosure and foreclosure avoidance (short sales/deed in lieu of trust), sellers offering seller financing are in HOT, HOT, HOT demand.