The Scottsdale Real Estate Files: July 2008

As the prospect of preschool stares Brandi and I in the face for our oldest, it begs the question ... are you freaking kidding me?  How can our little guy be ready to start school of any sort?  Coming up on three years old, though, we know it's time.  Time to learn that there is a whole world out there outside of mommy and daddy.  Time to learn to share and play well with others (something his daddy is still working on).  Knowledge and acceptance are not the same animal, however.  We aren't looking forward to dropping him off that first day.  Not at all. 

There's no rewinding this tape.

I will take a moment here to pause in reflection.  Please enjoy the slideshow and musical accompaniment.  For the first (and last) time ever, I give to you the emasculating vocal stylings of Paul & Jack. 

Sorry buddy, you are going to kill me for this when you're a teenager.

There are scores of listings languishing on the market here in the greater Phoenix area.  Thousands upon thousands of them.  Many are overpriced.  Many are in less than ideal condition.  Many more are simply “okay” houses with “okay” prices.  That won’t cut it in today’s hyper competitive environment.  While these home selling sins are somewhat pardonable due to financial constraints, I still run across the occasional animal that should have gone extinct right next to the dodo bird … or 2006, at the latest. 

I’m talking about the “Exclusive Listing.”

In better times for sellers, the exclusive listing is often wielded by a listing agent who wants to keep the whole commission pie to him/herself.  Knowing that a property often sold before a sign was even planted in the yard, more and more agents began to horde their listings between 2004-2006.  They didn’t want to pay a buyer’s agent because buyers were a dime a dozen. 

You also had the sellers who thought they could save a few bucks by negotiating a slightly reduced commission by employing one agent to handle the transaction, and cutting out the perceived middle man (buyer’s agent).  This was folly, of course, because it greatly reduced the pool of buyers coming through the front door.  Reduced demand from potential suitors equals a reduced sales price.  But even though the practice was of the “penny wise, pound foolish” variety, many such listings would still sell in the frenzy that defined 2005 Scottsdale.

Now it’s 2008.  Instead of buyers mugging each other in the mad scramble to submit an offer on a property, any property, they are turning their noses up at the most pristine and reasonably priced homes on the market.  Sellers are offering closing cost assistance, private financing, cars, vacations, agent bonuses and an evening with their wives to entice leery buyers … okay, maybe not the last one.

This being said, it was downright confounding when I occasioned upon one such relic from the glory days.  Surfing a few websites this morning for properties that may not have hit the MLS yet, I stumbled across something that looked like a perfect fit for my client.  As I was reading the description, I began to get excited.  Mid-century modern construction with a contemporary flair in central Phoenix?  This might be the ticket!  Scrolling further down the page, I saw it.

“Exclusive Listing – Not in MLS!”

My initial ire faded to wonder.  I stared at the antiquated words on my screen as I would the wildlife in the Galapagos Islands.  Afraid to move for fear of spooking the endangered little creature, I picked up my phone ever so slowly.  I dialed the listing agent.  In hushed tones, I left a message requesting further information, and punctuated the call with the words, “You’re not really keeping a listing in-house in this market, are you???”  My next three calls went to associates.  I couldn’t wait to tell them that I had stumbled upon the Real Estate equivalent of a unicorn. 

They do exist!

As I wait for the return phone call which will never come (prompting me to put the agent on speed dial), I sit transfixed by the sheer audacity.  I’m dying to know if this exclusivity was the brainchild of the agent or the client.

“Hey, I’ve got an idea!  Let’s make a property even more impossible to sell in this market!”

“Sounds great!” 

“Just think of the money I’ll save!”

“Me too!”

Tell you what, fellas.  Don't take all of those "savings" to the casino until you actually produce a sale for market value.  Of course, if you are fortunate enough to procure a buyer, how will you know if you attain market value?  You haven't tapped into the largest pool of buyers to test demand.  

I have seen a few harebrained schemes in my day, but the exclusive listing is right up there with the best of them.  Its only rival is the "home viewing allowed upon accepted contract only" listing.

Good grief.  The things people do to themselves.

In today’s topsy turvy Real Estate market, many potential players have been scared to the sidelines.  Whether it be the buyer who worries that prices will continue to plummet across the boards, or the seller who laments the inability to fetch the same price that was attainable a year ago, there is a lot of market watching going on right now.  To be sure, these are unusual times.  Before you let the condition of the market at large dictate whether or not you buy or sell Real Estate, though, bear in mind that there is opportunity amidst chaos.  Just as the worst investments are often made in the best of times, the best investments are often made in times such as those we are experiencing today.

We all know that buying low and selling high is the name of the game.  The difficulty comes in recognizing the apex and the nadir.  If it were really doable, we’d all be billionaires.  As this determination is only truly made in hindsight, the key is to make the current market work for you, rather than standing around and waiting for the mythical “bottom” as a buyer or “top” as a seller. 

So, how does one not only survive, but thrive as a consumer in this tough market?   By making purchasing and selling decisions based upon a comprehensive strategy rather than treating each as isolated transactions.   Assess your situation, and decide whether the current market will provide enough positives to offset the negatives.  Here are a few such strategies that just might make a move feasible after all.

The Move Up Purchase:

The move up buyer is tailor made for this market.  Provided that you are looking to stay within the same market, if home values in your area have declined by 10% (purely arbitrary figure), that larger home that you have had your eye on is closer to your reach than ever.  If your $300,000 home took a 10% hit, and the $500,000 home of your dreams took a 10% hit, the value difference just shrunk by $20,000 (30k versus 50k in depreciation).  Such homeowners need to stop considering themselves as sellers.  They are buyers in sellers’ clothing.  That too-small home is all that stands between you and the tremendous deals that are available today.  Price it right, take your lumps, and you will free yourself to go give somebody a few lumps of their own. 

The Downsizing Scenario:

Downsizing to a smaller, less expensive home does not make good financial sense in this market.  The factors which work to the consumer’s advantage in the scenario above work to the detriment of the consumer here.  But what about the retired couple who doesn’t want to wait for the market to rebound?  One way to get on with their lives without taking it in the shorts by selling right now is to consider leasing the home.  Assuming that many people in this position will have a substantial amount of equity in their homes, they might even be in a position to draw a positive cash flow by renting out their existing home.  They would also be in a position to draw down payment funds for the home they wish to purchase in the form of a home equity line of credit (HELOC).  This is about the only scenario in which I would entertain the notion of drawing equity out of a property right now.  I have spoken with a few retirees lately who wish to downsize, but don’t want to sell in the current market.  I don’t blame them one bit.  Putting a tenant in their homes until the market is more conducive to commanding a more attractive sales price may be the way to go.

A More Battered Local Economy (AMBLE):

For the person moving completely out of area, it wouldn’t appear to be a very attractive proposition.  You get hammered on the selling end without getting to reap the rewards on the buying side.  So what to do?  Move somewhere that has gotten hit even harder by the depreciation bug than your community.  I admit, this is really more flippant than realistic, but if there are job transfers, family, etc. waiting in hard hit parts of the country, you can conceivably offset the low sales price of your current home with a lucrative buy.

INVEST, INVEST, INVEST!

Along with the move up purchase, this is the biggest no-brainer going.  With bank owned property listings, inflated inventory levels and a buyer pool diminished by tightened lending requirements, there has not been a better time to be a buyer since the Gadsden Purchase. 

While the resale market at large may have further to fall in value, there is really nowhere left to go for some of the bank property bargains I have encountered lately.  There is significant demand for the low end of the price spectrum, with multiple offers, cash buyers and bidding wars in some instances.  So when you hear that prices may fall another 10-20% across the board, it’s not going to be on the steals.  These properties may pull values down closer to them, but there is too much demand for the low end to keep falling in my humble opinion.   There are great values in land right now as builders have basically shut down until they sell off existing inventory.  Single family homes are attractive to many as a tenant can largely offset carrying costs.  It is a great time to have a few extra bucks in your jeans if Real Estate investment is in your blood.

There are more creative avenues to be explored in this market, but for the purposes of this post, I’ll stick with the basics.  The bottom line is that you can benefit from the current market with the right strategy.   Money is not only made by tucking more in your jeans, but by taking less of it out as well.  There is no such thing as a “BAD” market, nor a “GOOD” market.  There is only the market.  It’s up to you to bend it to suit your purposes.

Frustrated by what you hear on the news?  Don’t be.  Call or email Ray and Paul Slaybaugh today to determine the best avenue for your success in the Phoenix, Paradise Valley and Scottsdale AZ Real Estate market. 

I love Flagstaff.

It's our crazy uncle to the north. The city that shows up to family functions late, if at all, reeking of cheap liquor and Pinesol.

An eclectic explosion of free thinkers, loggers, aging hippies, Gen X slackers, Valley expats and weekend family gawkers, one would expect such a scene somewhere in Oregon or Northern California.  But just a couple hours north of the conservative bastion that spawned Barry Goldwater and John McCain?  It's another world entirely. 

As we have for the past few years, my family trudged up the hill to our place in Munds Park for 4th of July weekend.  20 miles south of Flag, and right off the I-17, it is the perfect spot.  Close enough to town for entertainment and necessities, but far enough removed to enjoy the bit of seclusion that one envisions for an A-frame cabin in the woods.

    Circumstances keeping us down in the Valley until Friday, we hit the road mid-morning on the fourth.  Unfortunately, that meant we missed the parade in downtown Flagstaff and the local Munds Park version as well.  No matter, we made it into downtown Flag shortly after one, where we met my folks, who had come up the prior day.

With my niece, Amber, in tow, Brandi, the boys and I met up with my mom and dad at an arts & crafts festival in Wheeler Park.  For five bucks, we were able to bounce the boys crazy in a bounce-house/inflatable slide smorgasbord.  We perused the craft stands, sampled some barbeque and watched the boys dance to a local blues band before piling back in the car to hit the next venue.

The Continental Country Club has been the highlight of Fourth of July's past, but it served as the consolation prize this year.  The local symphony was to be accompanied by a laser show at the outdoor amphitheater this year.  TICKETS WERE FREE!  Alas, you still had to have tickets.  All three thousand were sold out before we even knew the event was scheduled.  No fear, we would hit the country club in style, and have ourselves a grand old time.

And we did.

If anything, we had a far better time this year with the sparser crowd.  While the cool people of Flagstaff rocked out to lasers and classical music, we watched another local band, enjoyed great food and drink (Stone IPA on tap for $3!!!) and splendid company.  Some family friends have a condo in the area, and we hooked up with them.  With little ones of their own, it afforded the adults (I guess you can include me) the opportunity to catch up while the kids wrought havoc on the golf course.  As with years past, there were fun activities like a water balloon toss.  Unlike past years, however, other participants got more than they bargained for when we turned it into a full on war.  There is an empty cooler of water and a drenched contestant somewhere who will unequivocally tell you that victory went to Team Slaybaugh.

Heading back to the cabin, parents as wiped out as kids, we opted to forego the fireworks.  With only one display slotted for the entire area, it would have required 15 miles of travel on unpaved road to Mormon Lake.  They weren't going to get cookin' until 9 PM either.  With little eyelids getting heavier and heavier until closing up shop for the day on the drive home, we opted to finish the evening on the front deck of the cabin.  After carefully transferring the sleeping boys from car seats to beds, we put on sweatshirts, cracked open a bottle of red for the white and blue, and stared up at where the stars should have been.  We were only disappointed that a cloud cover had muted the heavens for a minute or two.  Soon we heard faraway booms and saw faint traces of light silhouette the pines before us.  Inconceivably, we served as the western outpost for the fireworks display.  We could not make out the colors nor the patterns, just the flashes.  It was actually a bit Orwellian, as if the War of the Worlds had just been launched on the far side of the mountain.  Mormon Lake seemed an odd choice of epicenter, but ... to celebrate a nation born of cannon fire and rocket glare, it was ... perfect.

Happy Birthday, America.

- The Slaybaughs