Elizabeth Newlin – Arizona Real Estate Agent

Now that buyers have started to get the message that now really is a fabulous time to buy (tax credits, low prices and low interest rates, oh my!), we’ve begun to encounter a new problem with getting people into homes.

There is still so much inventory out there (about 10 times as many houses on the market in metro-Phoenix right now as when I started in the business four years ago) that buyers are a little overwhelmed about how to start.

With so many houses on the market to choose from, and new houses coming on the market that fit the criteria they are looking for every day, buyers have gotten a little paralyzed by the idea that the ‘perfect’ house is out there.

I’m here to tell you now: No house is perfect. It’s the honest truth. Every house will have a flaw, whether it is a little bit farther than you want to drive, a tad more expensive than you wanted to spend, with an outrageous HOA, or without that fifth bedroom you always wanted, something about it will be less than ideal, I promise.

Case in point:

I have a client who I’ve been showing property to for about 6 months. We’d seen probably 250 houses. We’d made offers on 10ish that had not worked out for various reasons. We finally found THE HOUSE. A house in the neighborhood they really wanted to be in. A house priced how they needed it to be priced. A house with the same layout as one we had previously made an offer on (and not gotten) but in better condition, with new paint and carpet and on a cul-de-sac. It was plumbed for a gas stove like the husband wanted, and backed to a golf course. It was PERFECT.

We made a decent offer on this house and actually had our offer accepted. The home inspector pronounced it in nearly perfect condition and the termite inspector left me a voicemail that if I ran across another like it, he might be interested personally. Everything was going as smooth as ice.

Then the week before we were set to close escrow, the husband drove by the house and stopped to talk to one of the neighbors…. who mentioned the ’scorpion problem’ in the neighborhood. And, you know, that’s when all hell broke loose.

The husband (on my suggestion) took a black light over to the house that night after dark to the back yard to attempt to dispel this rumor about scorpions that the neighbor was peddling. Instead, he found 12 (that’s right, TWELVE) scorpions on the walls of the block fence and sides of the house.

SIGH.

(Sorry, just needed a moment.)

Don’t worry, folks, we went back the next night and I let him in to the house with the black light. We didn’t find any scorpions inside the house. So the buyers are still buying (set to close tomorrow) and are going to have the house professionally sealed the day after close of escrow (the husband has been out to the house every night since killing every scorpion he finds in the back yard).

But the point is: No house is perfect. Each house is beautifully different and flawed, just like people.

Speaking of which, no scorpions in our new, fabulous, newly build house (WITH a fifth bedroom), but it IS a bit on the far side AND we found a field mouse in the garage today. SIGH.

This post is in response to the person who visited my website today using the search term “terrified to call mortgage company about my foreclosure.”

My heart goes out to this googler. Not only is she losing a home, but she is additionally paralyzed by fear (and probably guilt) over the situation and unable to act. There are way too many people in this situation right now. And unfortunately, avoidance is only making things worse.

So if this is ringing true to your life, here is my advice:

CALL YOUR MORTGAGE COMPANY IMMEDIATELY. They don’t want to take your house. In this economy, not only will it not make them any money, but it will cost them big bucks to get it turned around and back on the market. Mortgage companies don’t want to own houses. They will do anything they can to keep you in yours.

Try to keep in mind that although this is possibly a humiliating and unthinkable event for you, nothing you have to tell the bank will be something they haven’t heard before. You aren’t alone and the representative you speak to will be unlikely to admonish or scold you. The rep won’t be happy, but he most likely won’t mock you either.

Take the tactic that you want to work with the bank to make this have the best outcome for both of you. What do you need to get through the rough period? A deferment of payment for a few months until you find a new job? A reduced interest rate to lower your payments? An extended loan period to lower your payments?

Let them know what you are doing to make things better. Are you job searching daily? Cutting back on non-necessity spending? Convey all of this information to the bank to let them know you’re doing your part in all of this.

I’m not saying the bank will make this easy. You need to be diligent with paperwork they will request and you may have to call back several times (I took a class a few weeks back where the instructor told us that banks train their representatives to say no to any request three times). Don’t be deterred.

You have options in this situation, but it’s important to get out in front of it. Don’t let your fear drag you down further. Man up and call.

It’s been a wild weekend of houses and more houses. The title of this post says it all. I’ve been to South Chandler, North Mesa, Ahawatukee, Gilbert, the Historic Districts of Phoenix and the majority of the new builds in the South East Valley.

The buyers are out there and looking for deals. Of the things I’ve seen in the last few weeks, a few stand out to me:

1. Out in Maricopa, there’s a new build in The Lakes at Rancho El Dorado with 1200+ square foot houses starting at $95,900. Can’t rent for less than that!

2. One of my clients has been looking at historical homes in downtown Phoenix, which is super fun. I tend to show suburban cookie cutters in the East Valley, so an adorable 1950s bungalow with a milk door makse me squeal. This cutie:

That has been totally redone with granite in the kitchen and a fabulous detached garage in back at $159,900 made me want to live downtown. Sure, it only has one bathroom, but so well done and in such a great location, how can you beat that?

3. Well, and if I’m going to post about great houses I’ve seen lately, I would be remiss not to mention this amazing Fountain Hills home:

My client who was looking in this area and I called it ‘the bridge house’ because it sits up above a bit of a wash. If you stand in front and look down underneath you can see to the other side. It’s an incredibly modern and well thought out home. We looked at many houses in this price range and our breath was taken away by this beauty. It’s currently listed at $1,980,000. Let me assure you, if I had two million, that’s where I’d be living.

4. The last is another downtown historical home. This one wasn’t in amazing shape, and it definitely was the scariest on the block from the exterior (driving down the street with my client, we couldn’t figure out which house we were looking for; when I finally realized which house was our destination, I said, “Of course that one. The one we wouldn’t want to go into. Awesome.”), however, the layout was generally good and the house was totally livable. It has a garage with a laundry room and three bedrooms and two baths, plus a decent sized kitchen, not to mention a ginormous yard. Add to that a neighborhood close to the light rail and with mostly fabulous houses (with expensive cars parked out front) and I’m thinking that with a little bit of elbow grease and time to get the market back on track and the $132,900 price tag will be looking like money in some smarty’s pocket. Yeah, I know it doesn’t look like much:

But I think I could amount to something special in the long run (although someone should totally clean the 8 huge cockroaches out of the bottom cabinet in the kitchen ASAP).

And that’s my market take for the day. Call if you want to see anything!

I know there are lots of people out there who are thinking about buying a house but struggling at the starting line. The headlines on the news are screaming: INTEREST RATES ARE HISTORICALLY LOW!! IF YOU’RE NOT BUYING NOW YOU’RE AN IDIOT!! And you don’t want to be an idiot. You want to be a ’smart buyer’. You want to get into the market at the ‘right time’. But you have just no clue where to start.

It’s complicated to get from the purchase price of the house to a monthly payment you can afford. How do you know when $200,000 is less than or equal to the $1500 a month you’re currently paying in rent?

I spoke with a new client (a first time buyer) last night who knows he wants to buy, knows he wants three bedrooms, knows he wants to live in the East Valley, but that’s pretty much it. My standard Realtor response to clients like this is to refer them to a lender who can prequalify them and give them all of the payment information they are looking for. Generally, I do this to save both them and me time. If they are serious enough about purchasing to contact me, then it’s in both of our interests to discover as quickly as possible if this is a viable option, and what price range we should be looking in.

That said, I know there are people out there who are afraid to call a mortgage professional. I get the fear. The fear comes from the idea that you will call the mortgage professional and give him all of your information (social security number, date of birth, income, debts, etc) and that he will put it all in his computer and then laugh at you. He will laugh and laugh and say, “What? You think we will give you money? Yeah right. Have a nice day, loser!’

I understand this fear because I have it. I was TERRIFIED to call a mortgage company when we bought our first house six years ago; as in, sick-to-my-stomach, pale and clammy, terrified. And even though I know mortgage reps personally, and I’ve been dealing with mortgages and money and all of this on a daily basis now for the last four years, this fear has not totally left me. Our new house is closing in less than a week, and I got the call yesterday that we received final mortgage funding approval and I was ridiculously relieved. I had this irrational fear that they were going to call me at the last minute and say, ‘Psyc!!’

So this post is for those mortgage-phobes like me. Here is a general breakdown of purchase price to monthly payment, to give you a better idea of what you can ‘afford’ (keeping in mind that credit and income are also a factor).

Let’s take for example this little cutie:

This is a home currently listed in Mesa for exactly $200,000 (yay, big round numbers!). Let’s pretend, just for the sake of argument that you wanted to buy this home for asking price. You are a first time buyer with not a huge amount of cash. You want to get into this house with as little out of pocket money as possible, and you want to know how much it will cost you on a monthly basis. And away we go:

As a first time buyer, the current mortgage restrictions require you to put down at least 3.5% of the purchase price. You can, however, ask the seller to pay for your closing costs. Therefore, when you come to the closing table, you will need a check for: $7000.

Your mortgage will be for $200,000 minus your down payment of $7000, or $193,000.

Five monthly fees come together to make up your mortgage payment.

1. P&I – Principle and Interest, which are the payments to the bank for your loan.
2. Home Owner’s Insurance – Generally paid to the bank on a monthly basis and the bank pays to the home owner’s insurance company on a biannually basis.
3. Taxes – Also paid monthly to the bank, who pays the government twice a year.
4. PMI – Private mortgage insurance (sometimes called MIP, for mortgage insurance premium), which is to insure the bank against you defaulting on your loan. This is required if you don’t put down at least 20% of the purchase price.
5. HOA – Home owner’s association, this is the only fee that is not paid to the bank and may not be applicable. But most banks will figure it in when they are putting together your costs because most homes in Arizona come with a home owner’s association.

Back to the cute little Mesa house for $200,000. Let’s break down the monthly payment.

Today, according to Wells Fargo the interest rate for a 30-year fixed FHA loan is 5.5%. According to this mortgage calculator the monthly P&I on that loan will be $1095.83.

Homeowner’s insurance should be less than $40 per month on a house of this size.

According to the tax records for this home, the taxes for 2008 were $1037.82, so the monthly taxes would be $86.49.

PMI for this home should be less than $80 per month.

According to the MLS, the HOA fees for this house are $32 per month.

So to recap:

1. P&I – $1095.83
2. Home owner’s insurance – $40
3. Taxes – $86.49
4. PMI – $80
5. HOA – $32

For a grand total of approximately: $1334.32 monthly payment and $7000 out of pocket at close of escrow.

Obviously this is just a general example. HOA fees can vary greatly, depending on what the community offers. PMI and home owner’s insurance depend heavily on the company contracted. Taxes depend on the city and the size and value of the home. P&I is greatly affected by interest rates. At least this gives you an idea and understanding of costs.

For more specific information, call your lender!! I swear, it’s silly to be scared. I’m silly. Don’t be like me.

In real estate, we tend throw around the word ‘value’ on a regular basis without acknowledging that it is an extremely relative term.

Dictionary.com defines value as estimated or assigned worth. It does not, however, specify who estimates or assigns this worth. An appraiser will assign your house a value based on comparable properties in the area and what your house has and does not have in comparison. A buyer will assign your house a value based on what he needs, how much money he has and whether he thinks he is getting a good deal. When you attempt to place a value on a home you are selling, you will inevitably throw things like emotional attachments, memories, and your selling timeframe into the mix. These three people looking at the same house are going to come up with three radically different figures. This truth is inescapable.

This weekend I showed houses in Scottsdale and Fountain Hills to a client who is transferring his family out from California. Their house in California is just outside of the San Francisco area in the mountains that overlook the bay. He wants to purchase a house with city and mountain views and a feeling of elevation that is similar to where they live now. We have been looking in the $1-1.5 million price range.

In Scottsdale this weekend we saw three houses in McDowell Mountain Ranch. Although the first one did have a nice view of Camelback Mountain and the golf course up there, I was not overly impressed with what that price would get us in that area. The houses were basically beefed up tract homes. They had some nice touches, but nothing that would make me want to run out and spend over a million dollars on a home. My client tended to agree. I have, however, had clients who loved the McDowell Mountain Ranch community and weren’t interested in other areas.

Fountain Hills was a little bit of a different story. In the same price range we were in neighborhoods that had a distinctly more spacious and custom feel to them. Although, ‘custom’ is not always a fabulous thing… we did view one house that held a very creative point of view, decorating-wise. In fact, I think that most people would say that ‘creative’ is treating it nicely. It had high-gloss red, black and blue concrete floors, it had red silestone counters, it had diamond-plate steel as a backsplash and covering the stairs. It had orange and yellow and purple and green walls, a life-sized statue of Poseidon by the pool and giant painted metal sculptures of flowers in the front yard. It had whimsical touches everywhere that I can’t even describe. Whimsical, EXPENSIVE touches, I should add. You see, the problem with this house, was that although the layout was decent for my buyer, it would be so expensive to even neutralize half of the things this seller had done to the house that it would no longer be worth it to my client. The expensive specialized decor actually reduced the value of the house for my client (and probably 90% of the general public).

The other house of note that we saw in Fountain Hills was an open house that we happend upon. It was in a neighborhood my client liked and so even though it was priced up at $2 million, we stopped in to see just how much 25% more money would get us. We discovered that in this particular case, 25% more money actually upped the value of the house to my buyer even more than that. This was an amazingly well put together house. It had so many unique (and generally-market-friendly) details that my client (and I) just loved. I’ve seen $3 and $4 million properties that I would by far prefer this one to, if I had the capital to choose.

The point of all of this is that it is impossible for one person to accurately prescribe a singular value to a property. As an agent, it is my responsibility to take into account factors like the current market, the necessary timeframe of the seller, taste and desires of the ‘general public’ and attempt to find the price that a normal buyer would be willing to pay for the property, not assign its value or worth. The fact of the matter is that right now, the price that a buyer will likely be willing to pay is below (and in some cases SIGNIFICANTLY below) the value of a home as seen by both an appraiser and the seller. This is an upleasant and largely unexpected truth to many sellers these days, but one that has to be understood for a seller to be successful in this market.

Now if only I had Peewee Herman as a client and he wanted to buy in Fountain Hills… then I bet I could get a decent value for the seller of that one house!

One of the big stories in the financial news today (that didn’t involved the car companies asking for LOTS of money) was the one about 4.5% mortgage interest rates.

I heard talk of this from a couple of sources before I actually went out and found the articles to read for myself. Most of the talk was in the, “Check it out, soon you’ll be able to get a home loan for 4.5%!” and, “Hey, who cares what your interest rate will be on your new home will be when you buy it, just refi for 4.5% after you close!”

When I actually went and read the articles, it was apparent that there was a little more to all of this than, Woo!!! Awesomely low interest rates!

I also gave Matt, my mortgage guy a call to run through it all with him; which was quite an enlightening experience. I came away from all of this research with the sense that everyone has more questions than answers about this entire proposal.

To begin with, the entire idea that the government will ’set’ mortgage interest rates at 4.5% is revolutionary and extremely complicated. Currently, the government does not set interest rate, the market does. Rates can be affected by things the government does (dropping the prime rate, for one), but individual lenders who actually loan the money are the ones who dictate what they will charge you to borrow the money.

So how can the government force lenders to set their rates at what they want? Will they offer bailout program money to the banks who participate? Will they further insure loans taken at this rate?

The other bit of info floating around has been the idea that this interest rate may not apply to refinances, because the intention is to stimulate home purchases to reduce the current national surplus of houses.

Right now lenders do not differentiate between home purchases and refinances when setting interest rates. So again, how will this work? Will everything change? And how long will it take to implement all of this?

And the biggest question of all: Will they actually pass this idea? And will it stimulate the housing market?

So… everyone needs to sit tight for a little while and see what’s actually going to happen before getting any hopes set on things like interest rates lower than they’ve been in 45 years. And that is what I’m going to do for now.

I am currently working with three different clients who have radically different viewpoints on house repairs.

Client #1:

A first time buyer who is stressed about anything that appears to be broken in a house. Drywall cracks are especially disconcerting to the couple (and unfortunately, common in Gilbert, the primary location we have been looking in) but we’ve discussed several other issues that have made them uncomfortable with the idea of purchasing one property or another.

Client #2:

A buyer with much in the way of DIY skills, who wants to purchase a property with lots of potential in the ’sweat equity’ arena. We’ve looked at houses with partially finished additions, houses with doors that lead out to nothing but a 15 foot drop and houses with termite infestations. None of these issues have deterred him, just the complications involved in obtaining a mortgage on these houses.

Client #3:

A seller with a house that has great bones, but that cannot catch a break concerning the escrow in which we’re currently embroiled. This poor house has encountered in the last three months: pool equipment theft, inadvertent locking of a security door causing the house to be inaccessible, a slow leak into the kitchen cabinets causing water saturation and mold, pool pump leaks, a brand new garage door opener not opening, a bizarre leak/paint bubble in an exterior wall in the master bath and various other small issues/necessary repairs.

All of these home buyers/sellers have different motivations for their strong feelings about what needs to be repaired in the houses they’re dealing with. Client #1 does not have a lot of capitol to put into a house after purchase, so they need it to be pretty move-in ready. Client #2 wants something that he can put his own stamp on. He loves things that are not as attractive to other buyers, but that maybe he can polish from a stone into a diamond. Client #3 knows that his house isn’t a lemon, but is frustrated with the bad luck he’s had regarding repairs.

My personal view about home repairs is that anything can be fixed. Termites can be treated, mold can be re-mediated, leaks can be repaired, pools can be degreened and refinished. It’s all a matter of how much it will cost, and who is going to pay for it. And this is why you need a decent real estate agent, because those are the big questions in real estate. How much is it going to cost to make my house into my home… And who will pay to do it? Your agent needs to be there for you to get that answer and make sure that it is the one the will work for you.

Our new house is currently under construction and due to be completed and close December 23, 2008. Which, I know, is an insane date to attempt any kind of move. But I’ve decided that I’m kind of into it. I really do not love the whole ‘decorating for Christmas’ thing and I actually think it will be pretty special to spend our first night in the new house on Christmas Eve.

Anyway, we are building in a new planned community out in North East Mesa called Mountain Bridge. It’s a Blandford Homes community and I couldn’t be more excited. Check out the view from our balcony off of the master bedroom:

Yeah, that’s right; a green belt AND MOUNTAINS. I’m genuinely sick-to-my-stomach-ecstatic over the idea of mountain views from my own balcony. WITH ENOUGH BEDROOMS FOR ALL OF MY KIDS TO HAVE ONE OF THEIR OWN (yep, that’s how excited I am, I’m shouting at the Internet). Whee!

But enough of my own glee. My point is that building a new home is kind of an awesome option. I have several clients who have either gone this route, or at least considered it recently. I’ve shown 3,600 square foot houses for $299K out at Signal Butte and Elliot. I’ve sold 1,800 square foot houses in Maricopa for $114K (last month!). I currently have a client under contract to build at McQueen and Ray on an over-sized lot, 2,200 square feet, for $250K. There are fabulous deals to be had. There are great builders still in business.

Don’t however, make the mistake of going this route alone. The deals may be amazing, but the pitfalls are deep. Builders continue to declare bankruptcy without warning. Brown Family Communities, a local builder who was in good standing with all of their creditors, abruptly filed for bankruptcy, October 24 of this year, leaving buyers under contract high and dry. Keep yourself covered. There are things you can do to protect your earnest money. Hire an agent to show you the way and watch your back. And keep a close eye on this page.

Real Estate on TV is all the rage right now. The DIY shows seem to have given way to shows about ‘fixing and flipping’ or remodeling to sell for the most possible money. I am, of course, obsessed. It’s my two passions coming together (have I mentioned that I LOVE TV? I do. Feel free to sneer, I’m used to it. I still love it).

Unfortunately, for the most part I have to enjoy my real estate TV for its drama and the ridiculousness of it all rather than any resemblance to real life. In fact, I watch that show, “Million Dollar Listing” on Bravo primarily so that I can scream at the TV about how stupid, egotistical and cartoonish the agents on it are portrayed. And don’t let me forget to mention my very favorite pseudo-real estate show, “Flipping Out”. How can you not love a gay obsessive-compulsive narcissist with a fixing and flipping business whose primary hobby is driving his friends and employees sometimes literally insane? You can’t. He’s just so lovable.

However, I watched a new real estate-centric show on TLC today that I actually think has a lot of basis in what’s going on in the industry right now. It’s called “Hope for Your Home”. I’m not sure exactly how each episode is different, but this particular episode was about a family who had purchased a home with an adjustable rate mortgage that was just about to adjust. Their payment was going to go from $2000/month to $3000/month and they couldn’t afford the new payment. They needed to refinance their house to get a loan that would have a lower payment, but couldn’t without increasing the value of the house. A real estate professional came into the house and told them what renovations they should do to increase the value of their house and then brought in a team to help them.

I’m not sure how realistic the details of this process with the family were, but the general idea of a home owner in a mortgage with a payment that’s about to increase is a problem affecting way too many people right now. Addressing this problem with a solution other than: A) Suck it up and pay it, or B) Walk away from the house and let the bank foreclose, is inspiration I think this country can use.

Many, if not MOST of the people who purchased houses in 2005 and 2006 in Metro-Phoenix are underneath their loans. Of those people, the ones who got a loan with a fixed rate and who are staying in the house they bought for the next 5 to 10 years are fine and dandy. All of the rest are likely in trouble. That’s a lot of people who can use some solutions right now.

The family on the show turned a half-bath into a full, made the master closet a walk-in, repainted the exterior and generally uncluttered the house. It cost them $10K and according to a mortgage broker, upped the value of the house from $350K to $400K, allowing them to refi for a payment of $2300/month. The numbers were a little neat and tidy to be true, but the work they put into the house and the concepts behind the actions seemed extensive and noteworthy.

It’s a show I’m going to be keeping my eye on.

Have we ever discussed down payment assistance? I’ve explained the program so many times in person that I can’t recall if I’ve ever set the metaphorical pen to paper about the subject. Well let’s just assume for the sake of this post that I haven’t; here’s a quick run-down.

When the market (and the economy) was hot a few years back and the mortgage industry was a thriving, risk-taking, happy-go-lucky thing, there were loan programs that provided 100% financing. A buyer could purchase a property with no money down and wouldn’t even be on the hook for closing costs if he or she could get the seller to agree to pay them. 100% programs were among the first to be cut when things started to sour and mortgage companies began to go belly-up.

The government sponsors what’s called an FHA loan, that allows buyers to purchase a house with only 3% of purchase price down, and this 3% can be gifted to the buyer. This is not a new program at all, but during the boom, there was little reason to use FHA loans and they kind of went out of fashion for a few years. Now that 100% is gone, the FHA loan is the new black, if you know what I mean.

Down payment assistance programs like Ameridream (which is the most well known of the programs, but Nehemiah is another) are a kind of work-around that turns FHA into a 100% loan. FHA stipulates that although 3% down can be gifted to the buyer, it cannot be gifted by the seller (too close to home). So a non-profit organization called Ameridream was created that allows people to donate money to them and they, in turn, gift that money to buyers for their down payments. It allows a seller, if they agree to it, to donate the 3% down payment to Ameridream (plus a $500 service fee) in the name of the buyer of their house and then Ameridream will gift that money back to the buyer, who can then buy the house. I know, it sounds shady, but it’s been taken to court lots of times, and had so far stood up to the scrutiny.

Unfortunately, that has come to an end, at least for the time being. The housing bill that The President recently signed made these down payment assistance programs illegal as of October 1, 2008. The idea is that these loans where people don’t have any money to put down, are much more likely to be defaulted on, thus costing the government more money to pay back the mortgage companies (FHA loans are loans that are made by banks, but insured by the government).

So here’s what it comes down to: if you want to buy a house with no money down, you better do it soon. And by soon I mean like next week. Until this ruling is overturned or appealed, you’re going to need at least 3% of the purchase price of the house you want to buy saved up, or you’re going to be out of luck.