The Scottsdale Real Estate Files

Investor. 

The word alone inspires a host of reactions that run the full gamut between antipathy and, well, slightly lesser antipathy, depending on the audience. 

Image From the Hubbel Telescope of Investors Invading Local Real Estate Market

 

As any semi-interested news watcher and industry blog reader can attest, the Real Estate investor is the greatest scourge to befall our fragile ecosystem since polybutylene plumbing.  What, with the housing supply lines ill-equipped to handle the artificial demand, our flimsy pipes swell and burst when the pump and dump investment surge strikes a hapless market.  Aside from the banks who flooded Wall Street with dubious mortgage backed securities that were chopped and reconstituted in more numerous and indiscernible ways than Joan Rivers' alleged face, the fount of no-money-down investors is the most vocally derided catalyst of the Great Real Estate Bubble of 2005 ©. 

Well, guess what?  The investor is back … and that’s a good thing.

Hold your rotten tomatoes and easy with the pitchforks, if you will.  How can I possibly opine that the reemergence of the buyer subset that sent values through the roof, only to crash them through the basement when they left a valley of foreclosed “investments” in their wake is a good thing?  Is the demand any less artificial now than it was when the previous incarnation of ne’er do wells spiked our collective punchbowl? 

In a word, yes.

The 2010 investor is not the fly-by-night operator who purchased the nearest home for sale at the conclusion of a four hour seminar on how to get rich in Real Estate investing with no money down.  Shoot, who needed money down when you barely needed a pulse and a job to buy a house back then?  No, today’s investor, by and large, is showing up at trustee sales and plunking down cash on a barrel.  He has the skin in the game that his counterpart of yesteryear did not.  He is investing in a very real sense of the word.

In addition to securing an interest in the property with his own bankroll (thus making the prospects of simply walking away from a property that doesn’t return as hoped less palatable), the other crucial dynamic at play is the return of sanity to the overall investment arena.  When investors were driving Scottsdale and Phoenix property values into the stratosphere back in 2005, there was little regard to the initial purchase price.  Our entire market temporarily forgot that you make your money on the purchase.  Buy a property right, and the return will be there when it’s time to sell.  In the throes of insanity, investors were climbing over themselves and each other to purchase property, any property, for 50k over whatever ludicrous price was being sought by an apoplectic seller.  Investors were betting on the come.  Pay whatever now, and the joint will be worth 100k more in two months whether a hammer is ever swung in renovation or not.  With the year long fervor, they got away with it … for awhile.

Today’s investor is not settling for just any property he can get his hands on, but is showing up at the courthouse and robbing the bank blind.  Paying pennies on the dollar and rehabbing a previously dismantled home, his margin is large enough to bring the distressed apple of his eye to market at a price actually supported by recent sales comps.  

The coup de grace?  Today's investor fills a need that the banks won't.  He is essentially financing the fix-up costs that many banks have abandoned in self-defense.  Against a backdrop of tight lending purse strings, consider the difficulty many people have just in coming up with 3.5% or 20% down payments, let alone remodeling capital.  With home equity lines all but vanished from the marketplace, that stripped bank-owned home bargain isn’t all that realistic for the buyer who doesn’t have the available cash to put it back together, regardless of how appealing the price tag.  When you could tap a line of credit to finance improvements, it wasn’t that big of a deal to throw in some new carpet, counter tops and appliances after closing.  Now, you have few options other than reaching into your own pockets.  Thus, there is a sizable buyer pool for a move-in ready home.  The well heeled investor who assumes the risk and fills that need is not to be derided. 

 

Take the mom & pop homeowners who are unable to price their homes competitively due to high loan balances, mix with the interminable wait of short sales, fold in the distressed condition of much of the bank-owned inventory and bake at four hundred degrees to create a casserole of supreme frustration for many disenchanted home shoppers.  A rehabbed home at an affordable price, if not the outright theft that was envisioned at the outset of their house hunt, begins to look more and more appealing to many buyers after getting an up close look at what the reputed bargains actually look like live and in color.  In essence, by purchasing a property from an investor, a buyer has found an end-around to financing renovation costs. 

If your last nickel is earmarked for your down payment, and you can purchase a renovated home at a fair market value that you can afford, don't begrudge the man his margin.  While the stereotype of the lecherous vulture remains, we would be remiss not to acknowledge the good he can, and does, bring to a market like ours.

 

Investors:  they’re not just for nuclear Real Estate holocausts anymore.

 

Read more of my Scottsdale Real Estate Missives or start your Scottsdale Home Search here!

You want to buy a bank-owned property.  Your friends, family, mailman, dental hygienist ... even your Realtor have told you that the foreclosure market is where you pan for gold in this market.  Lo and behold, the hygienist might actually be right this time (bummer about that last hot stock tip, though).

 

 

I am actually a late convert to the bank-owned frenzy because I have long been wary of purchasing property that lacks the standard disclosures, maintenance ... and humanity, if you will.  Up until recently, it was often a mad rush for fool's gold, as well.  The allure of "cheap" often masked an unreported truth: many foreclosure properties were actually priced at, or even above, market value.

Well, the worm has certainly turned.  So much so, in fact, that I find myself seeking out the bank properties first in many instances as both the quality of the homes and value built into the prices have caught up with the hype.  As more and more homeowners lose properties, it simply follows that they won't all be meth labs with peyote smoking derelicts squatting in underground bunkers in the backyard.  Not all have had the A/Cs, appliances, cabinets, etc ripped out by the spurned former homeowner on the way out.  Some folks have simply fallen on hard times, and have lost a perfectly habitable home to a bank that already has too many on its books.  Thus the fire sale prices.

It can feel predatory, or at least akin to scavenging, to prey upon the misfortune of another, but buying up these lower end (pricewise) homes is critical to the health of the housing market.  Until the excess glut is absorbed, supply will remain hopelessy out of whack with demand and values will continue to stagnate.  As will the careers of countless professionals whose livelihoods depend on it.  Realtors (I know, I know, we're cockroaches who will survive a nuclear housing holocaust), mortgage brokers and bankers, contractors, home inspectors, marketing reps, the sign guy, title officers, escrow officers, affiliated vendors, loan processors, underwriters, document couriers, secretaries ... it is absolutely staggering when you consider just how vital the health of the Real Estate market is to the vibrancy of our economy at large. 

Buying a foreclosure home is a community service.

So, now that you have settled your qualms about purchasing a foreclosed property, there are a couple of things that you should bear in mind.  We all know about the big hurdles with bank-owned property, I even touched on a few.  Aside from the typical pitfalls, however, I'd like to address an area that most never even consider.

You may just get such a tremendous buy that you will get hammered unexpectedly on property taxes and homeowner's insurance.

Case in point, suppose your super duper agent finds a pocket of homes that were selling for over $1 million in 2006-2007.  You jump on a smoking deal in the $500,000 range.  Be prepared to pay property taxes based on the assessed value from the last year. 

 

In other words, you are paying million dollar taxes on your new half million dollar home. 

 

 

With the huge price drops, the tax evaluations have not caught up with the market yet.  New evaluations come out in February, but they still might not accurately reflect the current landscape.  As such, you must be prepared to ride out at least a year (this year's evaluation is prepared for next year's taxes.  The die is already cast for the current year) with seemingly excessive taxes.  You can bet that the county and city will act to offset the reduced property value with a higher tax rate as well.  With the budget depending upon our taxes, they are likely to decline, but perhaps not as much as one would expect.

Homeowner's insurance could prove to be a higher than expected expense as well.  The primary reason for this is the replacement cost of the structure.  Some properties, especially newer custom homes, are selling for such bargain level prices that the sales price is not reflective of replacement cost.  As such, while you might be expecting an insurance quote to strictly adhere to the sales price of the home, that is not necessarily accurate.  You can't rebuild a million dollar home for 500k.  Who said I slept through math class?

There are additional possibilities to consider such as HOA reserve/beautification impounds that may be required of a buyer at closing for high-end communities.

As with any purchase, value is dependent upon a confluence of variables.  The opportunity for tremendous savings in the purchase prices of bank owned homes will typically outweigh many such potential bugaboos, but they can be far from incidental if you discover unforeseen expenses while sitting around the closing table.

So dive right into the foreclosure market if you are looking for a buy, but buckle your chin strap and call your trained Real Estate professional.  You don't want to try this stuff at home.

Don't get bitten by what you didn't know you don't know.

 

Start your Scottsdale bank owned property search!

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Put that down!  That's nacho cheese!

Well, in this case, I suppose it is yours.  In this economy, who isn't interested in holding on to as much of their cheese as possible?  As such, many Scottsdale home shoppers are passing on the pricier properties and heading straight to the bank-owned aisle.  With values such as the ones I encounter on a regular basis, who can blame them?

 

The Scottsdale Foreclosure Value of the Week is located in the prime McDowell Mountain Ranch planned community in North Scottsdale.  Originally developed in the early 1990s, this community is nestled at the base of the majestic McDowell Mountains and features some of the finest amenities (including community pools, walking paths, rec center, etc) in the entire Valley.  Boasting million dollar plus properties in a few of its exclusive subdivisions (Trovare, Sonoran Estates, etc), point of entry cost into McDowell Mountain Ranch is typically prohibitive to many.

Today's steal is a 5 bedroom Ryland home of approximately 2600 square feet with a pool.  On an interior lot which backs to one of the natural arroyos that define McDowell Mountain Ranch living, this bank-owned steal is listed at just under $430,000. 

Folks, this property sold for $675,000 in May of 2006.  I have not physically viewed this property as it just hit the market, but it appears to be in decent condition and includes upgrades such as stainless steel appliances, granite kitchen counters and pebble-tec pool surface. 

For more information on this and other Scottsdale foreclosure bargains, contact me at paul@rayandpaul.com.  To search the Scottsdale MLS, visit me at Scottsdale AZ Real Estate.

 

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Ray and Paul Slaybaugh, Your Guides to Value in Scottsdale AZ Real Estate!

(480) 948-9450

paul@rayandpaul.com

 

Holy leaping catfish!  The Scottsdale Foreclosure of the Week is the deal of the century!  Perusing the foreclosures this morning as I am wont to do, I stumbled across one of those bargains that make you re-read the price about seventeen times to make sure you read it right.

 

 

DC Ranch is home to some of the priciest Real Estate in the Valley.  A master planned community in North Scottsdale located at the base of the McDowell Mountains, just north of McDowell Mountain Ranch and east of Grayhawk Golf Club, it features a mix of custom and production level homes. 

Today’s insane value is a 3275 sq ft home that was built in 2006.  Purchased in January of 2007 for $765,000, the bank which foreclosed upon the previous owner is into it for $600,000.

The price on this newly listed REO property … drum roll, please …

$369,000!!!!!

Let me put this price in its proper context.  Two years ago, I sold a 1400 square foot red-brick home in South (entry level) Scottsdale, 1950s construction for $335,000.

I have a hunch that there will be a feeding frenzy on this one that drives the price well over list, but so what?  The lucky new owner will still buy this home for several hundred thousand dollars under market.

I don’t understand banks.  They stonewall short sale efforts only to turn around and lop a couple hundred thousand dollars off of market value once they foreclose.

No fear.  It’s not up to me to save them money.  Only you.  Shoot me an email or give me a call if you are interested in more information on this tremendous value.

 

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Holy Sneakers!  The Scottsdale Foreclosure Value of the Week is a 1416 square foot, 3 Bed / 2 Bath red brick home in South Scottsdale for … drum roll please … $160,000!

 

 

Built by Hallcraft in the late 1950s, this entry level subdivision of Scottsdale Estates is minutes from Old Town Scottsdale,  Sky Harbor Airport, the Loop 101 Freeway, ASU and Scottsdale Community College.  Homes typically sell in the mid $200,000s nowadays for properties in average, to slightly below average condition.  Matter of fact, the bank actually purchased this one back at auction for $230K according to public records, so you get a feel for the kind of bargain this is.  It will go fast, and it will need work!

If you need any convincing on the quality of the neighborhood, I’ve owned two properties in the subdivision and sold countless others.  Great for use as a primary residence as well as an investment property given the price point and abundance of possible tenants (students, professionals, retirees, etc). 

 

 

 

For more information on this or other bank owned property opportunities in Scottsdale, contact your Scottsdale AZ Real Estate experts today!  And don’t forget to sign up for email alerts which will notify you of updates to this blog by clicking the button below!