The Scottsdale Real Estate Files

The current market does not favor buyers.  I repeat, the current market does not favor buyers.

Allow me to explain.  For months, if not years, you have been told that the glut of housing inventory makes for a buyer’s market of epic proportions. Why, the ancient Greeks themselves would write songs about the opportunities that abound for any would-be hero with a hankering for a house.  The only problem with this suggestion?  It’s just not true.

What is a buyer’s market?  Most would define it as a preponderance of available supply and an accompanying dearth of demand.  Let’s take a look at both aspects of that equation.

In a perfect financial world, a buyer waits for the market stars to align in just such a manner before swooping in to claim a nest at a fraction of the “normal” cost.  It all works great in theory, but real world application necessitates that the prospective buyer be subjected to the same set of variables that has drawn down the pool of demand at large. It’s a buyer’s market when few have the wherewithal to actually buy.

Appraisal difficulties and tightened lending regulations are contributing to a somewhat artificial suppression of demand. The “want” is present in the market. Consumers want to buy houses. They want to take advantage of the greatly reduced pricing and sublimely low interest rates. Homeowners want to refinance their houses so that they can stay in them, thus contributing to the lowering of the overall supply.

Want has nothing to do with it. Without ability, all of the consumer confidence and desire does not translate to actionable demand.

So to clarify the lead-in to this post, the current Scottsdale Real Estate market does not favor ALL prospective buyers, as the “buyer’s market” connotation suggests.

Further, the favorable conditions for those who are in positions to purchase do not necessarily translate to negotiable strength. Well-heeled cash buyers, W2 employees with verifiable income, solid credit history/scores, etc will find that they do not call the shots to the extent that they were led to believe. The bargain bin of bank-owned foreclosures is incredibly crowded. You are elbow to elbow with competing consumers when a new shipment arrives. The mom & pop resellers, by and large, do not have the equitable flexibility to negotiate the 30-50% off of list price that many buyers envision. The short sale properties with the absurdly low price tags are, more often than not, pie-in-the-sky figments of the listing agent’s imagination. You submit an offer 10% off list price to the bank, which in turn proves to be 40% off the BPO (Broker’s Price Opinion) that is performed three months later. The bank tells you they will gladly approve the sale – for 75k more than you offered.

While the inflated inventory levels in the housing sector are cited often enough, it is not widely reported that the number of unencumbered properties available for purchase is far less.  In a market that is most assuredly not of the “see house, buy house” variety, the redaction of readily purchasable properties (due to competition in the low end, and lien encumbrances across the full pricing spectrum) tilts the negotiation playing field back towards center.  Neither party has a clear cut advantage when facing each other at the negotiating table.

The truth of the matter is that most of the savings that you can expect to uncover have already been factored into the asking price by the time a listing is brought to market. Sure, there will be those that require substantial negotiation, and plenty others still that simply fail to sell. Never underestimate one’s ability to overprice a house. These aren’t the homes you are most likely looking at, though. The ones that buyers are flocking to in droves are those that present the best value opportunities. And why not? Just be prepared for the competition that you did not think existed for said properties in this ballyhooed “buyer’s market.”

Trying to cobble “x” percent off the list price in circumstances in which others are offering “x” above the list price will only lead to frustration.  Don’t get greedy.  Do what it takes to lock up the lowest pricing the Valley has seen for seven to eight years (longer in some areas) while interest rates continue to hover around 5%, and you are well ahead of the game.

And lastly … smile.  You are the guy that so many lament not being right now.  You know, the hypothetical guy who spurs such proclamations at office parties and cocktail hours across the Valley:

“If I had two nickels to rub together right now, I’d buy every house on the block for less than I paid for my albatross back in ‘05.”

Originally posted at the Scottsdale Property Shop

“You mean, it’s ours? It’s really ours?”

They were so excited. Even after I handed them the keys, they were slow to believe that the modest Spanish bungalow was now in their adoptive custody. Over the course of four exasperating months, we must have seen and dismissed close to a hundred homes. This one needed too much work. That one had a poor kitchen layout. Yet another sat on the “t” of a subdivision’s entrance: bad feng shui, or so I was told. Before the market skies parted and yielded the seventeen hundred square foot, clay tile miracle that appeared to have met extinction in their price range, our flagging spirits were all but ready to pack it in. The fated mid-April discovery saved them from another year of apartment living. A challenge, at best, with a ten year old daughter in tow, let alone with a half-baked bun in the oven.

“Can we go in,” the wife asked in a small, cautious voice.

“Of course,” I responded. “It’s your house, Liz, you can do whatever you please.”

She ignored my extended hand and engulfed me in a fierce hug. Her husband clasped my shoulder in a vice grip which betrayed an adolescence spent laboring on the family farm in Iowa. His curt nod spoke volumes.

“You’re welcome, Mel,” I replied.

“Thank you both for hanging in there. I know it hasn’t been easy, and I can’t tell you how much I appreciate the patience and trust you’ve shown me. It’s been a tough slog, but I think we got it right.”

“Yes, we did,” Mel said, breaking his silence for the first and only time that morning.

“We would like to have you and your wife over as soon as we get settled,” Liz added.

“I’d like that,” I told her.

I meant it, too. I like just about every client I take on, but felt a special kinship with this couple for reasons that surpassed the extended time spent in each other’s company. After bidding the happy couple farewell, I glanced in the rear-view as I navigated my way down the tree-lined street. Instead of going inside, they remained rooted in place, holding hands and staring up at their new home.

I received a phone call from Liz this morning. Circumstances have it that Mel has been out of work for some time now.  Another casualty of economic war.  Unsure of what to do or where to go, their only readily apparent truth is that keeping the house is an impossibility at this point.  Perhaps they'll move back to the Midwest, where Mel can look for a position on the farm. See just how much life is left in those old, gnarled hands.

This evening, I'll grab some Tums and make the long, short drive to the pleasant abode with the placard beside the front door that reads "Heltzer Residence: Est. 2005."  I'll leave the reams of data indicating a value of 40% what they paid in the car.  No sense in beating a dead house.  We'll plant a sign in the front yard and add yet another chapter to the painful narration of the Greek tragedy that is post-bubble Phoenix Real Estate.

With an epilogue that is yet to be written, we soldier on.

*Names and specific circumstances altered for privacy purposes

On the Island of Oncewas, there lived but one scamp.

One strangely stoic, scoundrelous scamp.

There used to be more, there used to be four.

There used to be four and eight thousand four more on this shore.

So many scamps scamping are hard to ignore.

But there was no need for eight thousand and eight.

Scamps all sold houses, and Oncewas lacked real estate.

So ten left, then twenty.  Then a hundred and two.

Then three thousand and sixty, and their brothers, too.

Until all had gone except Scampy Magoo,

Who continued his scamping, though there was no scamping to do.

Letters rolled in each day with the tide,

Tales from ex-scamps in their travels far and wide.

One read, “Not enough kitchens, and too many cooks!”

Another, “Too many librarians to put away two books!”

“I used to scamp houses, now I can’t scamp my blood!”

“Why, they wouldn’t hire dirt and water to make mud!”

And what did he do, old Scampy Magoo?

He sent back his very own note or two.

“Act now, you scamps, the time has never been better!”

“The sun is brighter and the sea is wetter!”

“The ship is afloat, so come on back all you mice!”

And, “Buy your old plot for 2/5ths the price!”

He planted his sign and bided his time.

The scamps first returned in drabs and in drips.

One, two, then an armada of ships.

“Sign on the line,” said Scampy Magoo,

“No need to read it all the way through.”

“Just legal jargon that’s neither here nor there.”

“It’s the deal of a lifetime, I certainly swear.”

They took turns handing over their very last dimes,

Until at last Scampy reached the end of the line.

He tipped his hat, bowed deeply and thanked one and all,

And took his leave as there were more ports to call.

With a spring in his step and a twinkle in his eye,

His shrill voice once carried over the blood red sky.

“Oncewas is all over, I’m sorry to say,

But follow me to Willbe where a scamp can scamp and play.

The prices are low and the mangoes are sweet,

There’s a loan for every pulse ...

And an ass for every seat.”

The collection of hats in a Real Estate agent’s closet grows at an exponential rate.  We alternately don the garb of property evaluator, pitchman, marketing rep, receptionist / showing coordinator, contract prep specialist, home inspection consultant, appraisal jouster, loan oversight committee (of one), repair foreman, closing editor, marriage counselor, dime store psychologist, balloon animal fashionista, schedule contortionist, etc, etc, etc.  With the advent of Internet marketing, you can add a couple more titles to the overflowing job description: Google Engineer and Social Media Cruise Director.  Before you place too much importance on the latter two, make sure your virtual Captain Stubing has what it takes to avoid the icebergs of an honest to goodness Real Estate transaction.

Read the full article at the Scottsdale Property Shop Blog >>>

A well-heeled businessman strode into the foyer of a nondescript office building. Tossing a nod at the exiting secretary who held the door, he failed to suppress the knowing grin that tugged at the corners of his mouth. A quick appraisal of the surroundings threatened to dampen his buoyant mood, however. The threadbare plaid couch in the waiting area appeared to be a reluctant holdover from his grandparent’s den, circa 1981. Were it not for the well-thumbed magazines littered about the adjoining table, he would not have believed that clients were actually expected to plant their backsides into the hungry springs that surely laid in wait just beneath the Sanka-stained fabric. The secretarial desk, vacant now that the evening receptionist had departed, seemed smallish somehow. The faux wood laminate counter tops didn’t mesh with his recollection of level four granite. The walls needed a coat of paint. The soothing antique white had faded to a sickly yellow.

How does someone run a business like this, he wondered.

A low, reverential whistle interrupted his silent consternation.

“Well, look at you,” the familiar voice gushed.  “I’m still paying for those shoes, you know.”

He felt a twinge of remorse as he looked down at the Italian leather loafers. Whoever heard of tapping a line of credit for footwear? The moment quickly passed. The projection of success was a cornerstone principle to the manifestation of such.

“What price can you put on comfort,” he retorted.

“Sixteen hundred dollars and twenty eight cents.”

“Bah, it’s like walking on clouds. Besides, how can you possibly remember the exact amount?”

“Come on back,” his counterpart responded by way of an invitation.

Settling into the chair opposite the desk in his host’s office, he considered the barren wall to his right.

“Where are the awards?”

“Packed them away last year.”

“Why? I worked my butt off for those.”

“The game has changed, Junior. In case you haven’t looked around lately, people are hurting. Shoot, we’ve done our own share of hurting. Nobody cares about your sales records.”

For the first time, he really studied the face in front of him. The florescent lighting of the private office revealed deep creases that had remained hidden in the shadows of the dank reception area. The urgency in the red-rimmed, greenish-brown eyes was as palpable as the fatigue. There was an unmistakably hard edge to the countenance that seemed at odds with its hound dog expression. He was looking into a face that had seen too much combat.

“You didn’t invite me here to talk about my shoes.”

“You’ve always had a good head underneath that fifty dollar haircut. It’s time you started using it,” came the cryptic reply.

Sensing it was not his turn to speak, he let the silence expand before his counterpart continued.

“For starters, the cars, the vacations, the nights out … you’ve gotta knock all of that stuff off. It’s time you started hanging on to the dough that earned you all of those plaques,” he said, motioning to the empty wall.

“But-”

“No buts. Look around, Chief. This is what’s waiting for you if you don’t get it together.”

He clamped his mouth shut, deciding to let the enigma in faded blue jeans say his piece. The sooner he got out of here, the sooner he’d make it to the range. He didn’t have the slightest idea where the slice in his fairway driver had come from, but he needed to get it ironed out before the charity tournament on Saturday. Children's Leukemia this time? Diabetes Awareness? He couldn't remember.

“Moving on,” his appointed conscience interjected. “The real reason I asked you here today is to clear the air about the message you are promoting. Torpedo the kids' college fund if you like, we're resilient, but your clients deserve better from you.”

Kids, he thought as he folded his arms and sat back in the chair, bracing for the sanctimonious diatribe that was sure to follow. As in plural?

“Bear with me one second.”

His host pulled a worn, blue notebook out of one of the desk drawers.

“Hey, I’ve been looking for that,” he objected.

“Confiscated for your own good. Our own good. Let’s take a look at what you have been telling consumers, shall we?”

A brief pause accompanied the turning of pages.

“July 7th, 2004. You told Mr. Davis that if he didn’t buy now, he might soon be priced out of the market.”

“I was right! By December, prices in the neighborhood he was looking in had risen an additional ten percent –"

“And now it’s down forty percent. I know you thought you were looking out for his interests, but you only considered the short term prognosis.”

“That's not possible! Property values never decline in Scottsdale! We’ve been historically undervalued, especially compared to California. We’ve remained stable when other markets have tanked!”

“February 2, 2005. You told Mr. & Mrs. Flemming that the forthcoming bubble was a media myth.”

“Maybe not a myth, but it's definitely a media creation! If the talking heads wouldn't go on the news scaring the beejeezus out of buyers every night-”

“Right, Katie Couric created no-qual financing and the subsequent investor-driven spike of artificial demand that led to a massive housing glut and a skittish buyer pool. God help us if Anderson Cooper ever goes on air to tell us about the Easter Bunny.”

"You're telling me they're right?"

"You don't know the half of it," his colleague responded with chagrin.

“Yeah, yeah, well hindsight being twenty twenty …”

“March 8, 2006. You opined to Mrs. Sanjeve that the market still had some legs.”

“Things have slowed down, sure, but prices are still inching up,” he responded meekly.

“You had to know things were getting ready to go sideways. Prices may have held steady before the coming plummet, but days on market were starting to pile up. Homes that received five offers before the sign even got planted in the front yard were now taking thirty to sixty days to sell. The writing was on the wall, you just couldn't interpret the black and white truth through those rose-colored glasses of yours. Heck, you nearly got caught holding an investment property yourself.”

“I believe in our market. Scottsdale has always been the apex destination in Arizona. Our values don’t decline. Ever.”

“There’s that pre-bubble thinking again. Watch that reliance on past performance, Champ. Any market that relies on human buyers and sellers is subject to downs as well as ups. No more fortune telling, you understand me? From now on, save the tea leaves for the missus’s iced chai lattes.”

“She doesn’t drink chai,” he answered.

“She will.”

“Whatever,” was all he could muster in the face of such absurdity.  The audacity of being contradicted about what his wife favored as a beverage caused the vein over his left temple to throb with indignation.

“August 18, 2007. Right before their portfolio took an irreparable beating with the jumbo loan market disintegration, you advised the Echols that they, quote, act now before interest rates take off.”

"Wait a minute, 2007? That one’s not on me, pal!”

“You know what? You're absolutely right. My apologies. Forgot which market I plucked you from for a second. Do me a favor and send in 2007-2008 on your way out, would you? He should be here by now. Looks a lot like you, just a little stressed out.”

He chuckled as a knock came at the door.

“That must be us now.”

Instead of the expected visitor, however, a young woman poked her head into the room.

“Hour’s up. I'm really sorry, but I need the room back now,” she said.

He looked at his younger self and gave an embarrassed shrug of his shoulders before nodding in the direction of the new arrival.

“Tracey here just got her license in the fall."

A rueful shake of the head accompanied another pause. He glanced down at the neatly packed duffel of personal affects at his feet, wondering for the umpteenth time if the makeshift home office would hold it all. He raised his head and found the eyes of his disbelieving doppelganger.

"Last piece of advice. Spare yourself the martyr act and list some freaking REOs.”

________________________________________________

*PLEASE NOTE NO CAREERS WERE HARMED DURING THE WRITING OF THIS FICTION*

Just stretching my creative legs a bit, people ;)