Everything in real estate is written, and nothing is an agreement until all parties have signed and delivered the contract to the other.  In Tucson, we use a contract provided to us by the Arizona Association of Realtors, so that we’re all using the same form and the same methods.  I know some states do negotiations and any repairs differently, so let’s go over the general process here in Tucson.

There’s actually two rounds of negotiations when you buy a home here in Tucson.  The first is the initial round, where the price and terms are hammered out.  The buyer will propose a price, a close date, an inspection length, the terms of financing, who pays for what costs, and all the other terms and submit it to the seller.  The seller can accept, reject, or counter that offer.  And that goes back and forth until either you both agree, or until one of you says no and walks away. 

Once everyone agrees and signs, typically, the buyer goes through an inspection period.  The contract usually says 10 days, I like to write in 15 days when I represent buyers.  In that interval, the buyer conducts all kinds of inspections to the property, gets a set of disclosures from the seller, and generally finds out everything they want to about the condition of the property.

Inspections are at the cost of the buyer – that’s what you pay to mitigate the risk of buying a lemon!  The seller has to have the property available to the buyer, with utilities on, and generally stays out of the way so the buyer can have a thorough look-see.

Then there’s a second round of negotiations.  When a buyer is at the end of their inspection period, or earlier if they’re ready, they’ll submit a repair request to the seller.  This request actually may have two kinds of requests – those the seller *has* to fix and those the buyer *wants* them to fix.  But that’s a more complex conversation, best saved for you and your agent based on the particulars of your individual contract.

So the seller gets this repair request and they have a time interval (usually 5 days) to respond.  They can agree to fix everything, they can say they’ll do nothing, or they can counter that repair request in any manner.  Once the Seller responds, the decision goes back to the Buyer.  According to most contracts, the buyer can pretty much either take it or leave it.  Which isn’t to say further negotiation can’t go on, it just isn’t described in the contract.

If the buyer and seller agree on repairs, then congratulations!  There’s probably still some loan processing left, and probably a couple weeks left before closing, but you’ve made it through a huge hurdle and are a whole lot closer to completing the transaction.

And that’s how negotiations and repairs work for Tucson homes!

Summary of the Top Ten Things to Know about Tucson Real Estate so Far:

• Number 1 – A/C and Evaporative (Swamp) Coolers
• Number 2 -The Tucson Military Airport Vicinity
• Number 3 – Termites Love Tucson Homes
• Number 4 – Who does my Tucson Agent represent?
• Number 5 – Flat Roofs: Types and Maintenance
• Number 6 – Basements, Radiators, and other Non-sequiturs
• Number 7 – Tucson Area Fire Districts
• Number 8 – Escrow and Closings
• Number 9 – Community Property and Other Ways to Take Title

This compares the number of sales per price bucket for every July since 2007.  You can just see the purple 2008 bit peeking out between 2007 and 2009.

Couple things pop out at you, immediately.  First, see how the bulk of the home sales have shifted over time?  There has been a big shift in average home prices in Tucson in the past 4 years.  The less expensive homes are the ones that are selling.

The other thing to notice is the difference in the volume of sales, period.  That tiny little light green front shape represents the number of sales in July in 2010.  That big blue shape behind it is the number of sales in July 2007.  Not only have prices changed significantly, so has the volume of homes selling.

Granted, July 2010 was an ugly month for Tucson homes.  But August is almost always worse than July, seasonally.  We’ll find out by the end of the week…

I’m trying to get to the annual Realtor’s convention in New Orleans this year.  I entered a video contest for a free trip, and out of all the agents who entered across the nation, I made the top 5!

Now the public gets to select the winner.  This is where I need your help!

You can see my video here, and voting takes place just below the video player.  I’d sure appreciate if you took a few seconds, clicked “Kelley Koehler” and voted for me.

And now back to our regularly scheduled Tucson real estate stuff.

You will never get the same level of interest in your home as you will the first month your home listed for sale.  Heck, the levels of traffic you’ll get the first week your home is on the market are levels you’ll never see again – even after a price reduction.

That’s why “testing the market” at a high list price is a very bad idea.  You’re wasting all of that interest in your home, and those interested people aren’t ever coming back at those levels. 

You’re throwing away the flood of people that might want to purchase your home, in favor of a tiny trickle of interest later on when you become more realistic about your home’s value on the open market.

And then, once you start making price adjustments, buyers will always only want more of those out of you.  You’ll get offers closest to your list price the newer you are on the market.  The longer you sit, the more price reductions you make, the less you’ll actually net in the end.

Testing the market is a fool’s game – unless you’ve got time to spare and money to waste.

For example. 

There is a mythical $100/square foot price barrier I’ve seen in more than a handful of home buyers in Tucson.  I have no idea where this one comes from.  Often, home values are much more than $100 per square foot.

Take the chart above.  That’s the average sale price per square foot for homes in Southeast Tucson, built after 1990, with at least 3 bedrooms and 2 baths – a very typical home for that area.  Can you get a home there for less than $100/square foot? 

Absolutely.  The data shows you can.  In fact, it looks like about half the homes sell at or below $100 a square foot.

Is it likely to be in fabulous condition? No.  It will be average condition.

Will it be on a huge lot?  Not likely.  The typical home in that region isn’t. 

Unless it is a short sale or otherwise a distressed property.  If you want an above average house in the area, for a below average price, then there’s going to be something wrong.  Otherwise, it’d sell for more.

If you want the above average house, you’re going to pay above average – and that’s appropriate.  There’s nothing magical about the $100 a square foot mark.  That’s just where some homes happen to sell at in this small sample of homes in Southeast Tucson.  But certainly not the best ones.

Okay, so the actual birthday celebration is August 20th, but you should know about all the cool stuff going on ahead of time so you can plan appropriately.  Check the Tucson’s Birthday website for complete details.

According to the Tucson’s Birthday folks, August 20th, 1775, was when the Presidio de Tucson was established.  But archaeologists say there was a community here at least 4000 years before that. 

There’s all manner of events and specials going on to celebrate.  For example:

• The DeGrazia gallery is giving out free cake on 8/20 and has a special exhibit of original drawings and paintings that tell the Tucson story as seen by Ted DeGrazia.  The exhibit opened 8/2.
• Chick-fil-a at El Con is giving away free spicy chicken sandwiches on 8/20 if you say “Happy birthday Tucson!” at the register
• The Doubleetree at Reid Park is giving away free their “world famous” chocolate chip cookies on 8/20.  Mmmm warm cookies…
• The Tucson Zoo will be free all day 8/20 to kids 14 and under.  There will be animal demonstrations, giraffe feeding, and birthday treats for the animals.

There’s lots of other things too.  Check the Tucson Birthday website for the rest of the details and times.

Happy Birthday Tucson!

There were 75 short sales that sold and closed in July, and 1596 currently active short sale listings.  Of those actives, 644 are under contract in some manner.

On the other hand.  There were 250 foreclosed homes that sold and closed in July, and 1358 currently active short sale listings.  Of those actives, 466 are under contract.

Based on today’s snapshot:

There is a 21 month supply of short sales.  Of the short sales that go under contract, 11% of them manage to actually close.

There is a 5 month supply of foreclosed homes.  Of the foreclosed homes that go under contract, nearly 54% of them actually close.

As a home buyer in Tucson, one of these is a vastly safer bet that you’ll actually be able to purchase and close on a home. 

By the way – homes that are neither foreclosed or short sales?  There were 376 sales in July, with 4475 on the market and 565 of those under contract in some manner.  That’s a 11.9 month supply, with a 67% of those under contract actually closing and selling. 

So I was walking her through the decision process – what it means to straight re-fi vs cashing out, rolling loan costs into the loan or paying up front and how to decide which is better – and we got to the question of taxes.

She’s been told paying her own taxes directly, outside of her mortgage escrow account, is “better.”  Not that any one who has told her it is “better” can justify that with a reason.

In Tucson, we pay our property taxes twice a year, half at a time (though some people just pay the full balance at the start and just make one payment).  Typically, you pay 1/12th of your taxes every month with your mortgage payment, and your lender holds onto those funds in an escrow account, and then pays the tax bills as they come due.  If your loan balance is low enough, some lenders will allow you to pay your tax bill on your own, and won’t collect that 1/12th every month.

So which is better?

Well, it depends.

Many people find it easier to pay 1/12th of their taxes once a month with their mortgage payment, rather than have to come up with a couple thousand dollars for the tax payment.  You certainly don’t want to have a cash flow issue when your tax bill comes due.

However, if you’ve definitely got the cash to make that kind of payment – and you will keep it in an account where it will earn you some interest, do some work for you – then it might be better for you to pay your own taxes in lump sums.

• Single Family Home Average Sales Price: $208,371
• Single Family Home Median Sales Price: $160,000
• Single Family Home Units Sold: 703
• Single Family Home Months of Inventory: 8.3 months

• Townhouse Average Sales Price: $125,261
• Townhouse Median Sales Price: $115,000
• Townhouse Units Sold: 48
• Townhouse Months of Inventory: 12.3 months

• Condo Average Sales Price: $87,476
• Condo Median Sales Price: $84,000
• Condo Units Sold: 34
• Condo Months of Inventory: 13.8 months

• Citywide Average Sales Price: $202,592
• Citywide Median Sales Price: $155,000
• Citywide Units Sold: 693
• Citywide Months of Inventory: 10.0 months

Sales typically dip in July – but a small dip, not this cliff we just fell off.  Last month we had 1039 sales, this month there were only 693.

Couple reasons, to my mind.  First, seasonally, that’s what happens in July – sales go down as we start to come off our summer peak of sales.  Second, the tax credit motivated people to buy earlier in the year, so I think the sales figures we’ve been seeing in the past few months are artificially high.  They were always unsustainable levels given the rest of the market conditions.  I believe I said this over the past few months.

If there’s any glimmer of hope, it is that pending sales didn’t plummet; they went from 1774 to 1679 pending units.  Inventory went down slightly.  And, I’m also seeing more inquires and activity in the market in general, something my other agent friends confirm both here and in Phoenix.  In my experience, that activity takes about 4-6 months to cultivate, so if those people buy and sell, we probably won’t see any effect until the new year.

The average sales price ticked up slightly to $202,592, and the median was more or less unchanged at $155,000.  Last year at this time, the average was $217,455 with a median of $170,000.

While the number of homes listed for sale remained about the same – 6907 units compared to 6960 last year – the absorption rate went way up because the level of sales dropped.  We had just under 7 months of inventory last month, and 10 months of inventory in July.  That means at our current rate of sales, if no other homes come on the market, it would take 10 months to sell it all.  A balanced market is somewhere around 5-6 months.

There were 75 sold short sales and 248 sold bank owned homes in March, making distressed property 47% of the market.  Last month, distress sales were 43% of the market.

If you’re buying in this market, be prepared to look at a whole lot of distressed property, as that’s nearly half of what is actually selling.  And if you’re selling in this market, you’d best be pricing competitively and making all your small repairs and final cleaning before buyers come through.  There’s no second chances for sellers in this market.

Data gathered from the Tucson MLS and is deemed reliable but not guaranteed. Figures quoted here include only single family homes, townhomes, and condos in the 9 areas that make up the Greater Tucson Area: NW, N, NE, W, C, E, SW, S, and SE.

I’ve written about polybutylene in Tucson homes before, but let’s pull out a few highlights.

• You’ll find it in houses from the late 70’s to the early 90’s.
• The stubs coming thru the wall under your sinks are not an indication of what kind of plumbing is in the house.  There can be polybutylene in the walls and stub pipes coming out of the wall be copper.  You have to look either inside the wall or crawl space in order to know for sure.
• Just because it hasn’t leaked yet doesn’t mean that it won’t in the future.  If you’re buying a home in that age range, make sure you inspect carefully for polybutylene. 
• If you’re selling your home and it has poly, know that it is even more common for buyers to demand – and get – the house re-plumbed, paid for by the seller.  Do yourself a favor and have it done before you even list the property.  At a minimum, get a couple of bids for the work so you have something in hand and are prepared should a Buyer ask for the re-plumb.