The Scottsdale Real Estate Files

In many respects, the heralded Real Estate bargains to be had in Scottsdale and the greater Phoenix area should come with the disclosures that attend weight-loss product testimonials.

“Joe Homebuyer’s results not typical.”

“Always consult a physician before launching an intensive home search program.”

“Stretch thoroughly and lift with your legs when attempting bank-owned property heist.”

For the purposes of this piece, we are going to focus on the first caveat.  Every Valley resident has at least passing knowledge of some fortunate homebuyer who leveraged the current market to score a honey of a bank-owned deal.  As big a nobody-turned-celebrity as the 170 pound guy in a Nutrisystem commercial holding up a pair of orca sized slacks as evidence of his former girth, Bob from accounting is the new gold standard for idolatry after securing the housing buy that set the office abuzz.  Before following in Bob’s considerable footsteps, however, there are a few things you need to keep in mind.  His results may not only prove atypical, but in extreme cases, constitute patently misleading advertising.

The hidden “gotcha” to many bank owned purchases right now are property taxes.  While the institution that owns the property should pay off any back taxes as a condition of conveying clear title to the purchaser, many buyers fail to properly account for the bill they will be saddled with for the next couple of years (at a minimum).  Unlike other parts of the country, where taxes are based solely upon purchase price, Maricopa County taxes are based upon the assessed value of the property.  Many falsely assume that the home they are buying for $350,000 will reflect a tax basis commensurate with that value.  As our budget revolves around 2 year property evaluation schedules, odds are very good that your current tax basis will reflect a value closer to the $1.1 million that the home sold for back in 2007.

*Click here for information about Maricopa County property taxes

*Maricopa County residents are entitled to appeal all new evaluations from the county assessor (typically go out in early February), but must do so within 60 days of the date they were mailed.  Click to begin the Maricopa County property tax appeal process online.

Another thing to bear in mind is that while the assessed value of the property is likely to decline rather dramatically over the next several evaluation cycles, expect tax rates to rise in contrast.  You should see an overall reduction to your bill in the future, but our strapped municipalities aren’t going to let go of all that revenue without a fight.  Already firmly entrenched in the red, it is an almost foregone conclusion that the tax rates will be fully maxed out to legally allowable levels to offset as much of the lost potential revenue as possible.  Your friendly, cash-strapped local government at work.

Another hidden sniper to these bank-owned bargains are Homeowner Association expenses.  While monthly fees are typically disclosed upfront (or easily determined through a few well placed phone calls), former million dollar neighborhoods can be fodder for massive asset preservation and capital improvement fees/impounds.  You might well afford the $120 monthly fee, but the bulbous community enhancement fee that is due at the time of purchase could blow an unsuspecting buyer’s budget right out of the water.  Given the many amenities that some such high end subdivisions boast, it would also be wise to expect and budget for future special assessments involving their maintenance.

There really are some amazing deals floating around the market right now, just make sure you really can afford them.  You are looking for a home you can comfortably maintain over the years, not a fad purchase that will lead to a lifetime of yo-yo budgeting.  While you might give your left arm to find the same "bargain" that Bob did, let's see how he's doing one year from now.  Is he still the water cooler rock star, or is that turkey neck starting to get a slight case of the gobbles again?  If he didn't do his due diligence, those hidden costs will eat up his calorie deficit faster than a three day bender at Sizzler.

You don’t want to end up back in the fat pants.

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It’s a daunting task.  Settled in around the bargaining table, you see nothing but pros, chips stacked to the ceiling.  Looking down at your comparatively meager stack, you’re tired of getting bullied out of hands.  Offer after offer you submit, only to fold under the check-raises from predators with pockets the depth of the Mariana Trench sewn into their five thousand dollar suits.  You are being methodically ground out of the main event.

Welcome to the Scottsdale Real Estate Market / World Series of Poker that is 2010.  The buy-in may be cheaper, but the odds haven’t been longer since 2005.  Why’s that, you ask?  The players.  The allure of the investment windfall has brought all of the serious card sharks back into the mix.  Good for the overall health of the market, but not so good for your chances of sauntering into the saloon of your dreams and winning its title on the river with a ten dollar bluff.

The penny ante games haven’t left the Valley, but the table keeps getting more crowded with first-timers, new arrivals, second home buyers and … gulp … professional investors.  It’s that last class of gambler that is making things tough on the buyers out there who can scarcely put together a 3.5% down payment.  Throwing around cash offers like a rousing round of 52 card pickup, the investor has an annoying habit of taking a negotiation and spinning it upwards.  A great property listed at the bargain price $250,000 turns into $267,500 for the lucky bidder in a few frantic blinks of the eye.

When competing with these well-seeded makos, there are several critical mistakes that buyers need to avoid if they are to keep from busting out at the table early. 

For starters, stop reading the papers.  Despite the blanket generalizations you are inundated with on a daily basis, houses are selling.  Especially in the price range you are shopping.  In fact, that 250k range is hotter than John Goodman in a polyester hoody in the middle of July.  Below is a highly scientific composite breakdown of the various market segments.

>$1,000,000:  Harboring enough inventory to choke a disinterested goat for the next two 2 years, this price range is more lifeless than a Jim Jones after party.  With few jumbo loan options and even fewer buyers in a hurry to drop this kind of dough in a schizophrenic economy, the greatest larcenies are to be had here at present.

$750,000 - 1,000,000:  Mostly dead, ala the pirate Wesley in The Princess Bride.  Only the occasional act of a miracle-making Real Estate agent results in a consummated sale.  If you can afford to shop this range, "have fun storming the castle!"

$500,000 - 750,000:  Patient has a nasty hangover, but not incapable of stumbling through the house for a bottle of Vitamin Water.  Given a couple hours and a plate of pancakes, he will return to some semblance of himself.  This price range is seeing movement for homes that were worth twice as much a few short years ago, but still in a bit of a fog.

$250,000 - $500,000:  Now we’re talking.  Especially in the Northern reaches of Scottsdale, homes in this range have their boogie shoes on.  Fortunately for all but the homeliest of homes, there are plenty of willing partners out and about on the dance floor.  Some are even adept at avoiding toes as they clomp about the market in gimungous platform shoes.

< $250,000:  Sold before you have time to jump up and slap your mama.

When you hear the reports and/or anecdotes referring to the “standard” or “average” percentage you can expect to knock off a list price, you need to understand what a ridiculous notion that grotesque simplification proves to be.  In the upper reaches of the price scale, you might very well knock 20-25% off a list price due to the lack of competition.  In the frenzied segments that most cash-strapped buyers are trolling, however, writing offers at 80-90% of list price will acquaint you quite dearly with the following reaction:

“HA! HA! HA! HA! HA!”

Fending off a throng of potential rivals, you will have to push all in when, after sitting through hand after hand of garbage cards, you finally draw the ace that constitutes a genuine housing value.  No point encouraging others to remain in the hand by going in low.  As the short stack, your only leverage is to force the issue early and hope you can stop the bidding before it starts.  Don’t give the sharks time to congregate and subsequently frenzy.  By aggressively moving all of your chips to the center of the table right off the bat, you might just chase some away to pursue easier pickings.  Let the deep-pocketed players linger for the turn and it’s all but guaranteed they will ultimately own you and the house you covet.

Price considerations aside, your next best shot to beat out the better financed buyer lies in the terms.  Hubris can be a damning thing for the guy with all the bucks, and he often fails to seek the additional information that someone in a weaker position must exploit.  Closing date, choice of title company, etc are concerns that Doyle Brunson over there just might expect to force through on the power of his awe-inspiring cash.  If your price is relatively competitive, your financed offer still has a shot at beating him out if you can find the terms that are most advantageous to the seller and include them. 

As to the homes you chase, knowing which table to sit down at is as important as the poker skills you bring to bear.  Bank-owned properties are going to be the most difficult for the novice player to obtain.  Financial institutions will sit on your offer for 3-7 business days while additional offers pile up, and they won't give a fig about any terms other than the ones demanded by their associated addenda.  It's tempting to sit down at these REO tables, given the big payouts, but it's often a fool's errand for the guy just in town for the weekend with his buddies.  You'll have more success if you stick with the slightly less lucrative owner-occupied resales that blunt competition from the pros. 

It’s not easy out there, despite all that you’ve heard, so remember to act fast, act decisively and save the gamesmanship for the slots.  Everyone wants a deal, but you can’t secure a value without first securing the property.  At prices that have rolled back to levels not seen in six to seven years, there’s no need to get greedy.  The well-positioned homes have the value already built into the price.

If you want it, and it comps out, don’t talk yourself into spitting in the wind with an offer predicated on faulty logic.  The national economy and generic offer-to-list-price-percentage paradigms have nothing to do with this one house and those who would buy it out from under you.  Long metaphor short, don’t write a $200,000 offer on a home listed at $250,000 that is worth $300,000.  Only adds unneeded time and heartache to your quest.

See house.  Evaluate house.  Make best offer to purchase house.  Buy Paul expensive, celebratory steak dinner. 

Easy :)

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We are all busy. Whether the responsibilities that overwhelm us are professional, personal or, most commonly, a combination of the two, who hasn’t lamented the lack of a clone for accomplishing the myriad tasks that 21st century living heaps upon us?  There are certainly days when I’d give my eyeteeth for an hour in the lab with the scientists who cloned Dolly the sheep.  Here’s my blood sample, now how soon can I get Paulie 2000 licensed by the Arizona Department of Real Estate?

Sharing the overscheduled and understaffed burden with the rest of society at large, one can’t help but find amusement in the march of technology towards supposed convenience.  Why, in no time at all, we’ll eliminate the 6-8 hour period of insufferable downtime that less assertive types passively refer to as “sleep.”  Productive little bunnies that we aspire to be, that precious block of REM is better spent chasing cabbage.  Against a backdrop of planned obsolescence, it is little wonder that we delegate the menial tasks whenever and wherever we can.  Secretaries to answer the phones, grocery delivery service, cardboard cut-outs of our likenesses to attend our kids’ soccer games … we, as a people, are a busy lot.

As the parental doppelganger is not recommended, there are a host of tasks that require eyes-on commitment.  Tucked neatly between personal attendance at an anniversary dinner and showing up for your own open heart surgery is viewing property.  While many aspiring titans of industry can likely conjure numerous higher and better uses of their time than knocking around houses for two hours on a Wednesday afternoon, this is one of those tasks that really does not translate well to delegation.  Enlisting an assistant to go in your stead is not only a mild affront to your chosen REALTOR (putting the value of his/her time on a par with said assistant), but much more significantly, a form of sabotage to your own interests.

Sure, who wouldn’t want someone else to fight through the forest of current inventory with a machete to blaze a clear path to the penultimate home?  In theory, the lackey can contend with the clingy vines and pit vipers while you focus on more important matters.  Let Indiana Jones return with a map to the treasure, and you can take it from there.  Simple.

Not so simple.  The problem with joining the adventure late in the game is that you lose the context, the knowledge gleaned along the way.  Even if your stunt double has your taste completely wired, and returns with an appropriate assessment of which home(s) is (are) worth your time, you will have missed out on valuable comparison shopping.  Stacking up neighborhoods head to head, comparing current values … every advantage gained through the cumbersome experience squandered.

Shopping for a home is a serious endeavor.  If you are not ready to commit to the process, you would really be better served to wait until your schedule opens up enough to permit a generous allocation of your time and energy.  With the advent of Internet home shopping, consumers have more ability than ever to research from the comforts of their own cramped apartments.  Agents, likewise, are better equipped to screen and vet properties before dragging their busy clients out of the office to see the latest hot bank-owned property.  Don’t miss the good ones (which still sell quickly, by the way) by adding a 4th layer to a 3 layer cake.  Glean what you can from the listings that don’t quite fit so that you are ready to act in a direct, unequivocal manner when you do see the right one. 

By committing to the effort now, your hunt will resolve itself sooner.  Don’t turn a 3-6 week tour into a 3 year search party by treating it like an adjunct to your day, rather than a primary component.  This is your new home we're talking about here, not a pair of relaxed-fit designer jeans.

See you at 3 PM, sharp. 

The assistant can patch any urgent calls to your cell while we’re out.

Without reasonable question, banks are in charge of the current Real Estate market here in Scottsdale and the greater Phoenix area.  Patently absurd low pricing of an overwhelming abundance of foreclosure and short sale listings dictates that financial institutions remain the bully of our local pulpit.  While we may lament this eventuality, we certainly cannot deny it without yielding hard-earned credibility.  Dominance in the marketplace, however, should not be mistaken for carte blanche to operate in a manner independent of obligation.

Consumers, and by the transitive property their chosen agents, put up with a great deal when pursuing a distressed (be it physical or financial) property.  Selling institutions call the shots on the choice of title company, manufacture from afar their own addenda that often flies in the face of local custom or … gulp … law.  All too aware that these catacombs house the buried Real Estate treasure they seek, buyers eagerly agree to any and all provisions the banks and their lawyers concoct.  For the most part, after scrutinizing the often arcane verbiage of said addenda and verifying that an actual, legitimate escrow company has been selected to perform the title work (as opposed to some flunky sister company on the other side of the country in which the seller has a financial stake), we swallow hard on the arrogance and proceed under the bank’s terms.  The values on their properties are just too good to be dissuaded by negotiable minutia. 

But that’s where it ends.

Perhaps a happenstance created by a bank that has become accustomed to proffering any mandate it wishes upon a transaction, many asset managers at said institutions and the lackeys charged with listing and selling their portfolios seem to have gained the mistaken notion that they can dictate deviations from the written purchase agreement based on the whims of internal policy.  Case in point, I am currently embroiled in a transaction that is going along swimmingly aside from the seller’s constant refusal to execute documents that were agreed to and made part of the original purchase contract.  I have heard numerous explanations for the contractual breaches, and some of them even make sense.  None of them, though, absolve the seller of their contractual obligations.

The learned attorneys who advise their clients (banks) not to sign certain documents would do well to advise their clients to address such matters at the time, if not before, the contract is negotiated.  I am not an attorney, but surely they understand that unilateral, after-the-fact contract revision and/or breach is far more likely to result in litigation for their clients than the terms of the documents found to be objectionable for one reason or another. 

Then again, perhaps deterrence from future litigation is not in the best financial interest of that crack legal staff.

I call on buyers and their representative agents to stand up for the rights and protections you are afforded by the purchase contracts you execute.  Fear of losing the bargain of a lifetime has led too many to cow-tow to the internal policies of the banks on the other side of the country table.  Yes, there are certain stipulations you must live with if you wish to purchase a bank controlled property, but at the end of the day, they are just sellers who must abide by the same rules and regulations as everyone else.  Assuming you didn't forget to pack heat on your way to a bank-owned gunfight, stick to your guns and do not suffer any shirking of the selling party’s obligations or infringement upon your contractual rights lightly.  And make sure you grab the glock, not the air rifle.  The pea shooter of polite request will just get your hair touseled and cheeks pinched.

It's big boy time when dealing with a corporate monolith.

You have a problem.  Your family sees it.  Your friends see it.  At the eye of the storm, only you lack the perspective to clearly recognize the wake of wanton destruction spawned by your vice.  Despite your feeble protestations to the contrary, you need help.  Your addiction does not end with you.  It touches the lives of those around you with dark, restless hands.  Probing unsuspecting pockets and vulnerable throats.

The cycle of despair ends today.  Your days as a perpetual Real Estate shopper are over.

House hunting can give you a rush like none other.  No buyer quickly forgets the first time he steps through the front door to a new potential future.  The magic.  The exhilaration.  The knowledge that one is virtually unfettered to choose his own adventure.  Of course, once that initial euphoria grabs a hold of a buyer, he must experience it again.  Houses 2-10 still hold some residual magic, but do not hold a candle to that very first experience.  Houses 11-20 hold an air of disappointment.  Soon enough, each successive property becomes a progressively greater assault on the sensibilities.  Your friends and relatives grow weary of your constant trolling of Realtor.Com.  Your erstwhile volunteers will no longer join you on the weekly Sunday home tour with your beleaguered Real Estate agent.

You don’t care.  Despite all evidence to the contrary, your silver bullet is out there.  You don’t need help, you just need more listings.  Where are all the new listings, anyway?  Everyone knows that banks are giving houses away for pennies on the dollar, so this simply must be the week that the 5000 square foot home on 4 acres hits the market.  For $125,000.

Welcome to Detox.  My name is Paul.  I will be your cold dose of reality for the next 30 days.

The first step to recovery, of course, is admitting you have a problem.  Trust me, you have a problem.  Further, you must admit that you are powerless to the tug of your addiction.  I offer as “Exhibit A” this August 9th, 2009 email sent to your agent regarding a property you found online.  Time-stamped at 3:48 AM.  “Exhibit B” is your agent’s cell phone records from 3:49 - 4:32 AM of the very same day.

Step two is to understand that a power greater than yourself can restore you to a sane existence.  No, it’s not your brother’s mail carrier’s uncle who owns four rental properties.  It’s your agent.  Listen to him/her.

We’ll just skip step three because we all know that the realm of Real Estate is presided over by a supreme being in the guise of a braying, one-eyed donkey with cataracs.  Pin the tail on him and you are as likely to get donkey kicked in the goods as you are to win the investment lotto.  See step two for obtaining the services of one who knows how to best manipulate, if not outright tame, the fickle Real Estate beast.

You are now ready to move on to step four.  This is where you take full and unflinching stock of your own morality.  “Thou Shall Not Steal” is a typical shortcoming of many Real Estate shopping addicts.  The thrill of the grift, after all, is one of the primary tarpits into which the saber-toothed buyer has fallen to become bogged down to such an irretrievable degree.

While admitting to yourself the wrongs you have committed is no picnic, neither is admitting those things to the higher power of your choice and a fellow non-home buying human.  When you can do so, you have conquered Step five.  Don’t even think about omitting the part where you burned 1897 hours and 16,789 gallons of your agent’s time and gasoline.

Step six is opening yourself up to the full removal of the defects in your character from a higher power.  Once again, your agent will gladly fill this role in absentia and remove said defects via Paypal and/or rubber mallet.

If you can bring yourself to ask for said absolution, you have mastered step seven.

Step eight requires that you make a list of all those you have harmed and be willing to make amends.  You can start with your spouse, co-workers and anyone you have pumped for advice and proceeded to dutifully ignore.  Just make sure that your REALTOR is somewhere in the mix.  No greater sin than trumping his/her decades of industry experience with the sage advice of your hairdresser and life insurance agent.

Step nine is actually making the aforementioned amends.  A little wine and cuddling to soothe frayed nerves and egos is a good start, but cash money absolves all.

Step ten directs that you continue to take stock of your failings and immediately admit subsequent wrongs.  You may be on the road to recovery, but that doesn’t mean you are immune to calling a listing agent directly to schedule an appointment after your agent has patiently educated you over the past year and a half.  And yes by the way, that does make you a bad person.

Step eleven directs you to establish more direct contact with your agent.  Email and the occasional phone call will suffice.  He or she is tired of sending smoke signals in the direction of East Jabib to reach you.  When the right property comes along, don’t make a search party necessary.  Bloodhounds are pricey by the hour.

Step twelve is reserved for those Career Buyers who have had complete spiritual awakenings and will actively work to spread and promote these guiding principles to their brethren in shopping addiction.  Praise the lord and pass the turnips, you are now ready to purchase a home!  Go forth and proselytize!

Should you experience temptation to return to your former habits or worse, suffer a relapse, it is important that you understand three things:

1) These things happen and you are still loved.

2) Just not by your agent.

3) You are completely and totally screwed.