The Housechick Blog

I’ve got a buyer thinking about making an offer on a short sale property.

Remember, a short sale is where the owner owes more on the house than they can sell it for.  They’re most often incredibly long, frustrating sales, and often, the sales never actually complete.  You have to get the lender to agree to take less than what is owed, and, well, I don’t want to go into a huge short sale discussion now, but know that they’re often ugly transactions. 

On the plus side, if the listing agent deals often with short sales, knows that they’re doing, then you’ve got a better chance of actually purchasing a short sale home.  That’s a better chance, but still no guarantee.

Today, there are 665 single family homes in the Greater Tucson area marked as a short sales in the Tucson MLS.  In the last 6 months, 139 disclosed short sales have actually sold.

Which makes the chances of a short sale closing roughly one in five. 

Last time I ran that calculation back in March, it was one in ten. 

Progress? 

As part of buying a home, you’ll get a big packet of stuff from the Title company, with a preliminary title report. It’s very important that you read through the stuff the title company sends you, as the title report can uncover some interesting things. Such as….

See those words circled in blue?  “Well agreement.”  Ah, what well?  We have no information about a well on the property.

Also this: see that blue arrow pointing to that long rectangle?  That long rectangle is a utility easement, 10 foot wide, where the electric company has the right of way to that strip of land on the parcel, a strip where the owner can’t put a building or a fence or otherwise obstruct the electric company’s access.

Now, I’m no surveyor, but I’m going to give you one guess as to where it appears house is, relative to that easement…

I’ve been thinking a lot about trade-offs lately. 

Whether you’re buying or selling a home, there’s always a trade-off.  Price for location.  Condition for price.  Yard size for age of home.  Condition for age of home.  The list goes on.

I think it’s important to make smart trade-off decisions.  If you’re a geek like me, you could make a weighted scoring function to help you decide.  But if that doesn’t float your boat, you could always just sit down and make a list of pros and cons. 

I think learning how to make those trade-off decisions is the hardest part about selecting a home to purchase.  Your picture of the ideal home may change over time as you see what kind of homes are available for your money in Tucson.

It’s a skill that takes a bit of time to develop, and one that I can help you with, but ultimately the decision is always yours.

I’ve got a sweet first-time buyer couple going through this right now.  Not only are they making a decision which home to purchase, but it’s one of their first big decisions as a couple.  Will it be the one with the big garage and back yard with no HOA and the small bedrooms and new paint needed?  Or the move-in ready one with the smaller yard and garage and the HOA?

I had one of my properties re-roofed last week, and the experience really drove home two points for me:

1. If you’re selling a home and it needs a new roof - just put it on now while you have time to gather and compare bids.  It’s expensive, yes, but it takes a potential huge objection away from the Buyer as a negotiating tool.

2. If you’re buying a home and the roof needs to be replaced, make sure the Seller is going to be on the hook for any extra costs that might be incurred when the roof is replaced, for any extra damage that the roofers might find.  Many times, you can’t get on a roofer’s schedule fast enough to have it all done before close of escrow.

My roofer found a layer of insulation we didn’t know existed and huge patches of dry rot and dry wood termites that we had to correct - which came close to doubling the cost to replace the stupid thing.  Can you imagine if you had just bought a house and the roofer bill came in at twice the estimate due to the unexpected damage found underneath old layers of roof?  You better make sure that the Seller is going to pay that bill.

Photo via Flickr, courtesy of marielito

I had a different post planned for today, but thought this would be more interesting.

I’m pricing a home where there have been no solds in the neighborhood for the past 6 months, so I had to go back a little further than I might normally, so that I can extrapolate the current potential market value. 

And I must say, normally sold prices don’t line up so clearly over time.  Guess which two solds are distressed sales?

And granted, this chart doesn’t take into account the condition of the properties - but I’ll throw in that they range from original (from the late 1970’s) to partially updated and the one I’m pricing is completely remodeled.  Of the two active listings, the higher priced one is a partial remodel with 4 poor pictures, while the other one has no interior pictures and a single line description - it’s a relative unknown at this point.

I’ve decided what I think is an acceptable range of values for the property - what say you?

How much is this home worth in today’s market?

Home Buyers always ask me: how much should I offer?

I like to ask them how they prefer to negotiate.  Are you a low-baller?  Or more of a "this is my firm and best offer" sort of person? 

Personally, I like to craft offers that I think are just below their threshold of acceptance, to put something in front of a home seller that is just low enough that they aren’t sure they want to take it, but just high enough that it’s tempting for them to just accept it and have it done with, if you know what I mean.

But - as a person buying a home - you need to negotiate in a style that is most comfortable to you, so that regardless of the outcome of the negotiations, you’re satisfied with the process.  As an agent who’s worked with many buyers and sellers, I’ve seen all kinds of tactics and strategies.  And at one point or another, those strategies have all worked and they’ve all failed.  Everyone’s different.

So - what’s your negotiating style?

No SPDS No CLUE.

Say what?

If you’re looking to buy a home in the Tucson area, I bet you’ve seen that more than once in the listing descriptions.  So what does it mean?

SPDS = Seller Property Disclosure Statement.  This is six pages of questions that a seller answers about their property.

CLUE = Comprehensive Loss Underwriting Exchange report.  A fancy name for an insurance loss history report.

Both are required to be delivered to a Buyer during the home inspection period per our standard Tucson real estate purchase contract.  But with the foreclosures and whatnot, there’s many a bank or seller that will not fill out and deliver those two documents.

So what do you do as the buyer? 

Well, for starters, I’ll give you a blank copy of the SPDS, so you know what a seller *would* have answered.  Maybe it will make you ask questions of the house you may not have thought of, or will prompt you to get that extra inspection NOW that you will have really wished you would’ve had when 2 weeks after close that one thing you didn’t look at or consider breaks/dissolves/lays eggs in your closet/is sucked into a gigantic earth crevasse in your back yard. 

We’ve talked briefly about short sales before.  A short sale is where the Seller isn’t going to make enough money at the sale to pay off all the loans on a property.

If you’re trying to buy a short sale property here in Tucson, be ready to be patient.  There can be lots of hurdles to jump before you can actually close on a short sale. 

If you ever do.

Close, that is.  It doesn’t always happen.  What I’m seeing more and more is that an agent will put a short sale into the MLS at well under market price.  Now, there’s no guarantee that a bank will accept anything remotely near that price.  If we look at the history and see that they’ve tried other prices over time, then maybe we’ve got a chance of getting it at that low price.  But more often than not, what initially looks like a fabulous bargain is just a teaser price.  The bank may never accept a contract anywhere near that list price.  Why should they, if they can just foreclose and then sell closer to market after foreclosing?

The local Tucson MLS system made a rule at the end of July 2007 that short sales must be disclosed in the Agent Only comments of a listing.  Out of curiosity, let’s see how many short sales were disclosed from the start of August to now, and how many of those sold.

In the greater Tucson area, there are 450 properties disclosed as a short sale.  6 are under contract, 81 sold, and 309 either expired or were withdrawn.  There may be some duplicates there, of course, as properties are withdrawn and re-listed, but let’s consider this a ballpark figure, eh?

So: 81 sales out of 81 + 450 + 6 + 309 = 846 possible short sales since August of 2007, when the disclosure rule was created.  That’s roughly a one in ten chance of a short sale actually selling.

Which ought to tell you that sometimes, trying to get a short sale is a massive waste of time.  Like I said, be ready to be patient.  There’s a chance the thing will actually sell, just not a huge one.

Photo via Flickr, courtesy of TT in the Desert

Oh you mean those valuable broken fixtures and piles of newspaper???

Often while walking through what is an otherwise empty and vacant home, I run across piles of junk left in the garage, or in a storage room, or piles of yard clippings in a heap over in the side yard.  And my Buyers always want to know: are they going to leave that pile of stuff there?

Well - one of my favorite parts of our Tucson real estate contract states that: “All personal property not included in the sale and all debris will be removed from the premises.”

Which means no, that stuff isn’t supposed to stay there.

And as a Seller, you need to make some plans to get any remaining personal property or debris out of there before closing.

If you’ve got a lot of trash type stuff, then maybe you need a small dumpster.  During my last home remodel, I made good friends with Jack, the dumpster guy, who has excellent rates - much cheaper than what the city or the big box stores charge.  Send me an email and I’ll pass on his information.

If you’ve got donate-able goods, we can call over the Habistore and Goodwill to take usable goods away. 

As a Buyer, you should always walk through a house a couple days before closing to make sure the piles have been removed.  If we find a lot of extra stuff in there initially, we might want to start addressing that particular contract clause earlier than that.

There’s a little section in the real estate contract here in Tucson where a Buyer gets to decide if they want to ask for a home warranty or not, from which company, with what coverage, and who will pay for it. 

A home warranty is different from your home owner’s insurance.  Home owner’s insurance protects your house and stuff in case of a loss, in general.  A Home Warranty is an annual service where if something breaks, you call the home warranty company and they send someone out to see if the repair is covered by the warranty, and if so, fixes it.  The service call (as of today in Arizona) is $60, regardless if the repair is covered or not.

Home warranties can be purchased at the time you buy the home, and can be renewed every year.

I tend to use American Home Shield, who’s base policy is $350 per year, and then you start adding on a couple hundred for things like pool equipment coverage, or refrigerator coverage, things like that.

There’s a whole booklet that gives an overview of what is covered and what is not. 

I’ve had clients with both very good and very bad experiences with home warranties.  Sometimes, people get a new air conditioner covered by their warranty.  And some people keep making service calls and whatever is broken is never covered by the warranty.

So should you ask for the home warranty when you’re negotiating to buy a home?  If you think you’ll use it or need it, by all means.  In general, the home warranty request isn’t a deal-breaker.  In fact, some sellers offer it up front in their listings.  It’s a side benefit for them as well - they get the benefit of using the warranty themselves (with some restrictions) while on the market, and then can pass on a full year of coverage to the new buyer.