Newsletter

The Realities of an i-Buyer

We were showing homes last week and 5 out of the 6 were owned by one or more of the i-Buyers that are very active in our market. Those i-Buyers have now become regular sellers.  It’s funny that they use the traditional method of selling homes to dispose of their properties.  All 5 were over-priced but appeared cosmetically to be in very good shape.  My buyer ended up settling on the one home that was not listed by the i-Buyer as it fit their needs better but also because it was a better deal for the property.

     You may ask yourself, what difference does in make to those seller’s as they have already completed their transactions with the i-Buyer, have their money and are down the road.  You would be right!  There are several questions I would like to ask, some of which have answers and some of which are sheer speculation.  These questions are:

 

Did I actually get the most for my home by selling to an i-Buyer?  This is the million dollar (not really but probably $20,000 question)  The answer is there is only one true way to know what the actual value of your home is in this currently extreme (albeit slowing) seller’s market. The i-Buyer can’t tell you, I can’t tell you, the government can’t tell you and an appraiser can’t tell you.  Only the market can tell you. I can offer great insight as to a starting point to price your home.  The only way to tell what your home will truly sell for is to place in on the open market and let the market tell you!

The i-buyer will try to tell you that their predictive model of the market accurately predicts pricing, but they are incorrect.  Of those 5 homes I showed, and we bought the one that wasn't owned by an i-Buyer, all five of the remaining have had a price reduction.  The market can be fickle and have its immediate ups and downs.  For instance, some holiday weekends are fantastic for selling homes and others are not.  Most of the time it is not predictable how a particular weekend will do and can be tied to weather or just the fact that everyone is out of town.  The bottom line, is  ONLY THE MARKET CAN DETEMINE HOW MUCH YOUR HOME IS WORTH! The only way to be sure is to put it on the open market!

 

Was the buyer knowledgeable enough about selling real estate to know whether they needed representation or not? Many seller’s think they have the same research tools and property pricing acumen as an experienced professional real estate agent but I can assure you they do not.  Going off the Zillow Zestimate plays right into one of the major i-Buyer’s hands and this estimate is notorious for being undervalued.  The last 5 listings that I have taken have gone something like this (with my estimate pre-prepared.  Me: “What do you think your home should sell for?” Client: “I have done some research on line and it appears to me that from everything I have read that is should be around $375,000 to $380,000” Me:  “My estimate leads me to believe that is

should be closer to $400,000!”  After listing for my recommended price, every listing has sold for more than the listed price.

     But it is also not just about price.  Part of what you paying a real estate agent for is to assist you through the process and make sure that you comply with things that will keep you from getting sued down the road.  Let’s say that the i-Buyer bought your home (leaving you unrepresented) and later discovers that there was a major defect in the home that you, as the seller, forgot to disclose to the potential buyer.  They are likely going to sue and now you are in a lawsuit with a company that has millions of dollars in assets, is very experienced in real estate and you essentially have no defense.  A real estate agent working for you would have tried to elicit those disclosure responses or at least been on the lookout for red flags with the legal obligation to protect you, their client.

What effect is the i-Buyer having on the market?  I am not sure anyone really knows the answer to this but lets examine some basic economics. The initial niche that i-Buyers filled was that of investors that were widely available, buying homes at discount, fixing them and selling them for a profit.  The current role of an i-Buyer in the market is that of corporate conglomerate with extremely deep pockets setting the bottom or at least a baseline of demand.  This may not sound like a big effect but if homes were so liquid that they could always be instantly converted to a cash position, the market would behave very differently.  This is creating an artificial baseline which would be equivalent to a reserve price on a stock below which it could go no lower.

     The other thing that happens is each time these i-Buyers purchase a home at/or near an inflated value and then attempt to resell it for a profit, if it occurs in sufficient numbers in a neighborhood, continues to put upward artificial price pressure on the market.  In essence, if they occur in large enough numbers, they can drive the market up all by themselves.  When they first appeared, I didn't think i-Buyers would become prevalent enough to affect the market, but it appears that this is no longer true.

Was the i-buyer’s initial offer better than their final offer?  I have been relayed many stories of an i-Buyer’s offer being reduced once they actually tour and inspect the home but amazingly enough, I have yet to hear of them raising their offer.  They do this in a number of ways, some as simple as saying “here is our revised offer”.As a professional real estate agent, I am obligated to get you, the client, the most money possible for your home.  The i-Buyer is banking on your willingness to take a small hit in money for the convenience of a sure thing and not having to prepare for and endure showings by the general public.

 

For the best service in the business and a no-nonsense but no-obligation approach, give the Al Gage team a call at 623.536.8200 or email us at al@algage.com

What It Looks Like if the Market Changes?

I am not ready to declare that this epic sellers market is over just yet! I am however sensing and feeling a bit of a shift.  This is backed up by a quote from The Cromford Report which sums up my position for seller’s at this time.  This is a direct quote from last months report by Tina Tamboer with the Cromford Report and matches what I am seeing, hearing  and feeling in the market.

For Sellers:
The Greater Phoenix housing market continues to shift from an extreme seller market into a less extreme seller market. As prices continue to rise, more new sellers are motivated to put their home on the market and fewer buyers are able or willing to pay the higher price. Over the next 5 months, give or take, the market is expected to move into a weaker seller market, driven in part by dwindling affordability and buyer fatigue.

The first half of 2021 has been so insane with contingency waivers and exorbitant offers over asking price that many sellers may not know what a normal seller market looks like. Here are a few things to expect:

· Sales price appreciation will not average 3.1% per month. April 2021 saw prices appreciate 5.1% within 4 weeks. May was 2.3%. June was 1.1%. From 2015-2019, a long-term seller market but much weaker than today, prices appreciated at an average of 0.5% per month with a range between 0.3% and 0.8%.

· There will be more list price reductions. It’s important to remember that the sales price is the LAST thing to respond in a shifting market. One of the first things to respond is a list price, in the form of a price reduction. When a seller overshoots what the market can bear, they will get the silent treatment in the form of zero offers. That triggers a price reduction by the seller. Weekly price reductions have risen 112%   since mid-February from 317 in a week to 672. In a weaker seller market, expect between 1,500-2,000 price reductions every week.

 

Sellers will get their price, but pay more in concessions. If a seller prices their home high in anticipation of excess demand but only gets one offer instead of multiple offers, they are more likely to accept home warranties, do repairs and offer concessions. Currently the percentage of sales involving concessions is very low at 4%, up from 2.7% the week prior. In 2019, a good seller market, 25% of closed sales involved seller concessions.

 

To put this in perspective you also have to see what is says for buyers from the same report..  It says:

 

For Buyers:                                                     Buyers with budgets over $300,000 may be noticing that they have more listings to choose from compared to a few months ago. This is especially true in the price points between $400,000 and $800,000 where inventory has grown 92% since February. When a buyer has, for example, 4 or 5 homes

available that meet their criteria instead of just one, they are less inclined to throw all of their ammunition into one home in order to win it. They may still offer full price or more, but may not be under as much pressure to waive contingencies and shorten inspection periods.

As this subtle change proliferates with more inventory, the buyer experience will become less stressful. As the median sale price continues to rise, affordability is something to pay attention to. Not what’s affordable to you necessarily, especially if you’re out of state, but what percentage of the local population can afford your home if you need to sell right away or sometime in the future. A family making the median income in Greater Phoenix could afford 63% of what sold in the 1st quarter of 2021. That was within the normal range of 60-75%, indicating a good time to buy or sell. While we wait until August for the 2nd quarter measures to be released, we expect the new measure to land around 57%, slightly below normal.  This does not indicate that the market will plunge into a buyer market causing prices to decline, but it does indicate a reason to expect prices to rise much slower going forward.

 

When you combine those two position many people will conclude that the market is going to crash and we are going to have 2008 all over again. I do not believe this is where we are headed.

 

If the market swings back softly after a prolonged seller’s market, we likely will not see any drop in sales price just a maintenance of price and possibly a return to a few more concessions as indicated in the article. A return to equilibrium in a gradual manner would actually be healthy for this market as there are many may buyers who have simply given up after six months of writing offers without success. 

 

If seller’s view this as the beginning of the end and flood the market with new listings, then would could see a shift to a buyers market. This shift however, will not likely be anything like the crash in 1991 or 2008 where we actually saw significant in the first and major price corrections in the second to the point that it almost destroyed the economy. I will reiterate it again that the 2008 crash, in my opinion was precipitated by the artificial demand of speculative investors which immediately evaporated when profit margins evaporated. In my opinion, this market is almost exclusively driven by demand from real potential homeowners for their primary residence which paints a much different scenario. 

If you want someone that has lived and survived these changes in the market, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

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Some New Terminology!

There is some truly new methods in real estate that may have existed before but they were almost never used before.  If those terms were used before it certainly was in a different context.  I cannot stress enough that these strategies apply for the RIGHT NOW of this market. Here is a list of terminology currently in play and a brief summary of how it is being utilized in this extreme seller’s market.

As-is.  This used to be used by the lenders on their bank owned properties to signify that they had no or little responsibility for the condition of the home. It is now being used as an enticement to seller’s to select the offer with this clause and eliminating any repairs.  It should be noted that this does not waive the buyer’s right to an inspection.  It only signifies that at that point the buyer will either accept the property or cancel the transaction.  Curiously enough, nothing in this clause prevents them from asking for said repairs at the time of inspection.  It is not recommended that  a seller demand that the property be sold as-is because this just plants the seeds that the seller is hiding a defect in the property.  It is acceptable to state from the beginning that no repairs will be performed in the current market.

10 Day Inspection Period. This 10-day inspection period is now miraculously able to be completed in 5 days to make the offer seem to be more competitive.  It almost always was able to be completed in 5 days but now agents are having to be Johnny on the spot to be competitive.  Unfortunately, the 5 days to respond for the seller has not changed and this is generally where we need more time.  If a repair request is received on Thursday, that only gives  until Tuesday for a response and many times it is difficult to get tradespeople in that short of time frame.

Inspection Waiver.  This one should make any agent nervous, and it is understood that the buyer is trying to make their offer more attractive.  Completely waiving the inspection is just asking for a lawsuit based on the condition of the property either to the selling agent or the sellers for failure to disclose a defect.  This one I see as more of a negative than an attractive prospect.

Non-Refundable Earnest Money.  This one combined with the one above is really taking a great deal of risk for the buyer.  Done in conjunction with a regular home inspection, this one signals to a potential seller that the buyer is not at all concerned with their ability to obtain the funds or loan to close on the transaction.  Many times, the buyer is more confident than they should be in today’s lending environment, but it is the buyers money that is being risked.  It should also be noted that this particular clause does not automatically make the earnest money forfeit if the property fails to close. If for some reason the seller fails or is unable to close, the buyer would be entitled to a refund of the earnest money.  They would also be due a refund if they cancelled pursuant to any remaining due diligence provisions such as inspection or appraisal.

Waiver of Appraisal. A complete waiver of the appraisal is being done very commonly in today’s market.  This is a very dangerous proposition for the buyers and their agents.  It is very difficult to predict the market and an appraisal right now.  Most appraisers are going along with the rapid expansion of home values, but I am sure not all.  What would you do as a home buyer if you purchased a home for $400,000 and it appraised for $220,000?   Even if all the comparable sales said that it was worth $320,000, that low of an appraisal likely makes you walk away from the transaction because of the disparity regardless of the consequences to your earnest money.  Please note this example was rewritten 3 times in this market because people are routinely paying $15,000-$50,000 over appraised value.

Appraisal Shortfall.  This is a much better way to accomplish the same effect as above.  This way allows for the buyer to waive a certain amount of difference between the appraised value and the purchase price.  Remember, appraisals are never based on loan amounts so in many cases, the difference in appraised value and purchase price has to be made up with cash over and above down payment and closing costs.  This clause places a definitive limit on the amount the appraisal can come in below purchase price and still require the buyer to proceed.  This method works well as it sets up the buyer with an exact maximum amount of funds needed.  It also clearly defines how much the buyer is willing to essentially overpay for a home.  It also reins in the inspections of the seller that they can simply ask whatever amount they want and get it.  While it is not uncommon for current buyers to agree to a shortfall of up to $30,000, not many have stretched beyond that amount in our price ranges.

Seller Lease Back or Post Possession.  Until this past year, only the really experienced agents, like myself, would even entertain a post or prepossession agreement.  All the brokers frowned (and probably still do) on them.  They are now the rage in the cage and almost every seller that needs one can demand one.  Let’s be careful with this one because being tied to a home sale means that it is adjudicated in superior court not like a regular eviction.  It also fuels the fears and reports of seller’s just never leaving the property which are rare but widely reported.  If your situation dictates that you need such an arrangement, it can probably be a reality.  Selling to qualify for a new home and need a 6 month lease back.  We can make that happen without all the discounts of a corporate I-buyer.

If you want this level of market knowledge and preparedness, call the only team you need to know! Al Gage 623.536.8200 or email at al@algage.com

 

A Jack of All Trades

But a master of none. That is how the old saying goes and it somewhat applies to what the expertise of a great real estate agent entails. So let me first start with the things that a successful real estate agent has to be a master of in order to represent their client.

Negotiation-this is not just a matter of relaying information from the other agent to your client. In some ways, this is an inherent skill that is difficult to teach. You may think, how important is negotiation in this obvious seller’s market. In this market having the wrong or an inept negotiator can cost you even more money. In honor of Father’s Day, I will freely confess that I learned some of my negotiating skills from watching my father who was a businessman here in Avondale for over 65 years and recognized in 2003 by the City of Avondale for over 50 years in business. He finally retired in 2013. He was a tough, fair, ethical but mostly a patient negotiator. I pride myself with not ever getting so emotionally involved in a negotiation that I make a mistake or an unintentional move. I have witnessed many transactions or potential transactions fail because one of the agents took offense or offended the other party. It simply is not that hard to be polite and courteous to your fellow agents or their clients. Being a veteran agent and not living paycheck to paycheck, I can accept doing things on my clients preferred timeline without having to push to satisfy some of my own needs. Being patient both with the timing of a negotiation as well as the parties involved is one of the strengths of my negotiating skillset. I have heard through the grapevine that other agents perceive me in the same way and that it is simply a waste of time to try to steal a listing represented by Al Gage.

Technical Expertise-  I am not talking about being able to write your own HTML or being an expert graphic designer. I am talking about knowing the nuances of the contract and having an in-depth working knowledge of what the provisions mean. Little things like even though the Inspection Notice Requires the repair to be done by a contractor, the repair can be performed by a handyman or the homeowner AS LONG AS IT IS DONE IN A WORKMAN LIKE MANNER. I always clarify if this is the route to take but knowing that this is possible is technical expertise. Additionally, there is rarely a situation that occurs in a transaction that I have not personally experienced in over 36 years in the business. Appraisal coming in low, death of a borrower, tax liens, solar transfer issues, repair issues are not just theories in a book. I have actually lived and survived each of those scenarios. It is very rare for us to simply 1. throw in the towel on a transaction. I have and had the escrow survived mentally incompetent parties, jailed or imprisoned parties, drug and alcohol dependent parties, and of course just plain jerks on all sides of a transaction. The psychology of how to deal with each of these scenarios is also part of our technical expertise.

. Experience-  There is no substitute for experience. If you are going to challenge an appraisal, you have to speak appraisal at least a little. If you are going to question a contractor, you have to know a little about construction. One of our requirements as real estate agents is to point out red flags. I have been through over 1500 escrows and remember the red flags for most of them. A red flag is a condition or technical problem that should have led the agent and their client to the discovery of an even bigger problem. When the floor of a two story home creaks on a step, that is likely a nail that is loose. When it creaks and drops two inches, that is a red flag. It is our job as agents to protect the client even to the detriment of our own position and we take that charge very seriously.

Now I will give you a list of all the things that we are not absolute technical or legal experts at but know enough about to help you in the transaction or can guide you to an expert in the field.

Investment property

1031 Tax Fee Exchanges

Property Management

Estate Planning

Probates and Wills

Lending

Escrow and Title

Short Sales and Negotiated Settlements

 

There are many others but this is a short list. Let me give you an example. I had a seller that said he wanted to do a 1031 exchange on his primary residence. I am no accountant or tax advisor but I do know that in order for a 1031 to be practical there are some considerations such as how much tax he would owe on the sale of his home and you have to put the proceeds into another home without reducing debt or a lower price of the real estate (of course the investment have to be like kind meaning real property) In this instance, since it was a primary residence, the seller would not have owed any taxes because their net profit was less than $250,000 so I told him that I didn't think a 1031 was in his best interest BUT I put him with an expert anyway. Come to find out, he would owe recapture because he had depreciated the home as part of his vending business. It still worked out better to pay the taxes on the depreciation than doing a 1031 because he didn't want the same level of property and debt.

 

For this kind of expertise, call Al Gage at 623.536.8200 or email us at al@algage.com

 

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Would You Leave a $30,000 tip?

Unfortunately, I have seen many people list their homes for much lower than they should be listed for in the last few months.   

For inexperienced or newer agents, it can be easy to do. In a normal market, I would review the comparable sales for the last six months and factor those into the calculated sales price of a home I was about to list. Under the current market conditions, a comparable sale that is six months old is almost useless (although I did have a lengthy argument with an appraiser to the contrary recently). Even a sale that is two or three months old must be adjusted significantly to reflect what the price will be by the time the home actually sells. 

     In other words, many of these newer or inexperienced or just unknowledgeable agents are not adequately making the adjustments in listing the homes for sale that they should be. The sellers are unaware because they have a parade of buyers and multiple offers over list price with no real way to tell if that is because they are under priced or just because the market is very hot. In most cases, the market will take care of itself and the home, if allowed, will quickly get bid up to the price that it should be selling for. I have to admit, despite 35 years of experience, I have been surprised at what some of the homes have sold for in recent weeks. I have seen at least one home that actually sold for $30,000 less than what I could have sold the home for. That $30,000 tip didn't go to the seller, to the agents, the title company, the lender or anyone else in the transaction except for the buyer. I have taken a lot of people to dinner in my life but I have never tipped that amount OR to the person I was TAKING to dinner.

     That being said, I am also seeing some homes linger on the market because they are priced too high! Agents are pretty desperate out there right now and will take a listing for whatever the seller asked them to list it for in some cases. This is just wrong but it does happen. The home price has to be based on some semblance of what the market has recently said the home is worth to have any chance of it appraising. I am seeing some transactions fall apart because the home is appraising just too far away from the sales price and the poor desperate buyer is losing their earnest money rather than finish the closing on a deal where they would be significantly overpaying for the home.

     See the graphs on the next page and you can project how much your home will go up if the market continues to trend the way it is. There are some statistical anomalies in there due to small sample sizes but the general trend for the past year is pretty clear.

If you want an agent that will professionally and accurately project the sales price of your home, give the Al Gage Team a call at 623-536-8200 or email us at al@algage.com

 

Should I Stay or Should I Go?

 Many of you may be asking yourself this question right now.  While I don’t like taking my strategy from a 1982 one hit wonder by The Clash, there is a certain amount of truth to be found in the song.  “The song says If I go there will be trouble, if I stay it will be double.”  In most cases the song is right about both scenarios in this market.  I will give you four different scenarios and show you how each applies in this market which may assist you with the decision of whether to make your move now or wait.

     None of these scenarios contemplate a major downturn in the industry although that is always a possibility.  For the purpose of this discussion, I will use a 10% appreciation rate to show the math.  I will also assume that the trend continues for one year and most other conditions remain the same.

     Scenario #1-You are selling your home and purchasing a more expensive home. Let say you are selling a $300,000 home and purchasing a $500,000 home.  You are not quite ready to move so instead of moving now you put it off for a year.  Both properties appreciate 10%.  This means that you sell your existing home for $330,000 instead of $300,000.  Great news!  It also means that you have to pay $550,000 for the home you want to buy. That is a net loss to you of $20,000. It also assumes that the home you want to buy is even still available and you probably pay at least a 1% higher interest rate than you could get if you did the transaction today.

     Scenario #2-You are selling your home and purchasing a less expensive home.  Seems like that would be a pretty simple solution.  Just reverse the numbers from the example before and it should be a clear sign to wait.  Let’s work the math.  I sell my existing home for $450,000 and buy one for $250,000.  Using the same math, if I wait for a year and they both go up 10%, I sell my home for $495,000 but still have to pay $275,000 for the one I have to buy which gives me a net profit of $20,000 by waiting.  But not so fast!  Unfortunately, I had to pay a higher interest rate on my mortgage AND because demand is so much stronger in the lower price ranges, I bid on 45 properties, was almost homeless and ended up actually paying $285,000.  Yes, I still saved $10,000 but it now appears that is was not worth it for all of the extra stress and aggravation.

Scenario # 3-You are simply purchasing a home.  This one is actually an very easy decision to make but right now it is very difficult to execute.  At this moment, we cannot get a buyer a home unless they have extra cash to pay the difference between an appraisal and purchase price or if they need any assistance whatsoever from the seller.

A $300,000 home right now will be $330,000 in a year and also run the risk of taking a higher interest rate.  Quite frankly, there is no end in sight for the craziness of this market so the sooner you can get your poker chips in the game the better off you will be.  If you are in a situation where you cannot purchase right now, you should be doing everything in your power to get to a point where you can as soon as you can.  Thinking about staying and renting, rent is appreciating as fast if not faster than home prices.  When you purchase a home, you guarantee that price of monthly expenditure for the life of that loan rather than an ever-changing rental market.

Scenario #4-You are simply selling your home.  If you are just selling a home, then perhaps the math works a little better to wait.  But for how long?  Trying to time it up and guess when this market will turn or a least slow down is very hard to time and very easy to miss.  If you sell your home today versus a year from now for 10% more seems like a no brainer.  Right now, buyers are not being very picky about the condition of the home and if they are, simply move on to the next buyer.  This means that selling now in an extraordinary market may mean that you don’t have to update the cabinets and baths or otherwise sink thousands of dollars into a home to make it competitive.  If the home is already in a competitive condition, you are currently guaranteed to get absolutely top dollar for a pristine home.  In almost every case, I am getting more for a home than the value for which it will appraise.

     So back to the song.  How can it be trouble now and more trouble in a year?

If your current scenario involves purchasing a home, right now it is really a matter of judging the market, being patient but very persistent and simply not giving up.  Yes you may overpay for the home you are buying but you will also be overpaid for the one you are selling.  The exception here may be winning the lottery at a new home builder. 

     A year for now we have many unknowns, but everything tends to suggest that we are going to keep on this trend for the next several years.  If it gets more expensive, it is just that much harder to find something that you like.  If demand slows, even a little bit, it will be easier to buy but you won’t be getting 10% over the appraised value for  a home that you have to sell either.  It may be less stressful to buy in a year but probably at a much higher price.

     It should be readily apparent that you need professional assistance both in navigating this unprecedented market and also in this decision-making process.  I suggest you ask us for a no-obligation consultation on your situation and remember, we are in the business for the long haul.  If we need to stay, we will stay and if we need to go . . . . . . . We can make that happen too!

For an free no-obligation consultation with the agent that is up to date on the conditions in your neighborhood and the experience to provide the best advice, call Al Gage at 523-536-8200 or email us at al@algage.com

 

What does "Neighborhood Specialst" Mean?

Well, I was down at the Department of Real Estate applying for my renewal of my certificate to be your “Neighborhood Specialist” when I woke from the dream.  Of course, the Real Estate Department or even the Board of Realtors does not hand out any kind of designation for “Neighborhood Specialist” in a particular neighborhood. So what does it mean to be the “Neighborhood Specialist?” 

     Over the years, we have had many people that claim to be the “Specialist” because they lived in the neighborhood or mailed to the neighborhood for as long as two years.  We have worked in Rancho Santa Fe since 1995 and lived there since 1999 but that alone does not make me the “specialist.”  A track record makes you the specialist.  I have been the top salesman in these neighborhoods for over 20 years which is more than most of you have lived in the neighborhood.  While it is difficult to retrieve and manipulate the statistics from that far back, we have sold homes for more clients than any other agent in these subdivisions by an almost 2 to 1 margin since 2012.  Statistics are great and I can prove that I am an industry leader in these subdivisions but that is really not what a neighborhood specialist means.

      Let me tell you a story about a listing that I recently sold.  I made the appointment with the seller and they gave me the address of the home and when I pulled it up on the tax records, the square footage just didn't seem correct for the description of the home.  When I contacted the seller, they also thought the square footage was incorrect, so they searched their records and found the floorplan originally from the builder.  This floorplan stated a slightly different square footage than the model that I thought matched the county records.  We looked at the listings of both the smaller square footage and the larger square footage homes on the internet and although this model had a slight variation in bedroom configuration ( a known but not common option at the time of construction), we were able to determine that the home was in fact  the larger square footage and proceeded to market it that way.

     You may ask “Why is in this case 142 square feet a big deal?”  It is simple!  Do the math!  142 square feet times and average of $200 per s.f. is $28,400 in average sales price.  We listed the home in conjunction with the higher of the two sizes.  We sold the home in 3 days for $20,000 over list price with a significant appraisal waiver.    Sure enough, when we got the appraisal back, the home measured the larger square footage, but the home still appraised for very close to my original suggested list price albeit a bit higher.  Not to worry and we proceeded to closing at $15,000 over appraised value right on time.

     I am not going to claim that I saved the seller $48,400 because of the over list price sale because that likely would have happened at either square footage.  I will say that by verifying the square footage in concert with the seller and their memory and marketing the property based on the larger size resulted in a $28,400 gain. This gain would not have been realized with an agent that did not know the neighborhood integrally and simply accepted the county records version of the size.

     This is what a neighborhood specialist brings to the table.  Can there be more than one specialist in a neighborhood?  Of course, there can be!  Only one of them will have the best track record in the area and that is the one that you should hire.

    In another instance of the specialist at work, a seller sold their home after multiple offers and unfortunately the buyer was unable to close due to a technicality with the VA.  A month had gone by and based upon my monthly tracking of the sales and trends of the market (we do a monthly neighborhood report via email for your neighborhood and please sign up on the website if you haven't already), I recommended raising the price by $10,000.  We put the home back on the market and received a cash offer more than $10,000 above that new list price and miraculously the home closed only 4 days later than it was previously scheduled to close.

     One of the most common instances working as the local expert comes into play is on appraising of homes.  Believe it or not, an appraiser must inspect the interior of the home that is being appraised but they do not (or cannot) inspect the interior of the homes that they use as comparable sales.  As many of you know pictures and descriptions of homes on the internet do not necessarily represent the true condition or layout of a home.  In most cases, when we sell a home in the neighborhood, we have toured the home to be appraised AND the homes that are used as comparable sales.  Even more powerful is when the homes that the appraiser needs to use as comparables also happen to be my sales.  This makes it very difficult for the appraiser to argue against my opinion of the appraised value and generally leads to a favorable outcome for our sellers.

     If all else fails, we can also dispute the value of the appraiser.  In one particular instance last year, the appraiser was not adjusting for the date of sale of the comparable homes.  This was leading to an artificially low appraisal.  We were able to accumulate three other appraisals from within the same subdivision, all of which showed an adjustment for the date of sale.

      At this point the appraiser was faced with our opinion differing with theirs and also three fellow appraisers differing and was forced to re-evaluate his position.

     If you are seriously considering selling your home, you always want to contact the “neighborhood specialist.”  We pretty routinely see homes listed for quite a bit less than what we know the home will bring in this rapidly changing market and it makes us sad.  At the very least, even if you intend to list the home with your sister’s cousin’s best friend, give us a call for an opinion of price before you list.  Remember, we always offer a no-obligation guarantee.  If you are not happy with our service or performance, you may cancel without obligation until you have accepted a purchase offer!

 

If you want to hire THE “NEIGHBORHOOD SPECIALIST” give us a call at 623.536.8200 or email us at al@algage.com

 

Don't Make a Mistake!

Imagine if you will, you are driving around on a Sunday afternoon and you just happened to stop by a model home center. You are a little surprised at the activity, but decide to go in and check it out. This may occur when you are going with friends to check out the home they just bought or just as a casual Sunday drive. Of course, you walk into the second model and decide that you just have to have that home! Can you buy it or one just like it? 

     Probably not! You may ask why? You have great credit, a good job and job history, sufficient down-payment and meet all of the other requirements necessary to get a mortgage or you may be in a position to pay cash! If you can pay cash the answer is now converted from a solid no to a maybe. The new home builder may say “Perfect! Sign Here! And we will put you in for a drawing or a lottery for that particular home. By the way, the interior colors for that specific lot have already been chosen and you will not be able to change them. Also, if you are not chosen for this lot, we have a price increase coming next week and it will be $5,000 more for the same home and $5,000 more the week after that.”  You may think this is disheartening and this may occur even if you can pay cash for the home. 

     If you cannot pay cash for the home because you have to sell your home, they likely will not even let you in the lottery to buy a new home. Bottom line, you have already made one mistake and at this point the new home builder may urge you towards making another one. They may say, not to worry about selling your home because we have this i-Buyer that we work with and they will buy your home for cash and let you move out when your new home closes.

     You are about to make your second mistake.  You call this i-Buyer thinking that your home is worth about $275,000. Low and behold, the i-Buyer comes back to you with an immediate offer on the property for $290,000 with no contingencies except for an inspection and allows you to stay in the home until your new home is ready by delaying the closing date until your new home is ready. Wow! Its more than you were expecting, and it is easy as well. No prep. No showings. No nosy people walking through your home. Most of all, no risk of Covid from having your home shown. 

     Without any further ado, you sign their offer and proceed to closing on both transactions.  You feel good about your negotiating acumen on the offer and what could possibly go wrong?   Plenty!

     As you read the details of the offer you soon realize that there is a service fee in addition to what a likely commission would be, adding up to a total of almost 10% of the sales price. Then they do an inspection and come back with an additional $20,0000 in repairs that they are requesting that you

perform. Just to help you out, they are willing to just accept a reduction in the sales price to offset the repairs. Again, but now somewhat more reluctantly you agree to those repairs.

     Or suppose, five months later, when you are ready to close, the market has now changed.  The i-Buyer is now no longer interested in purchasing the home because of the market change which actually happened at the start of the pandemic.  Let us assume that does not happen and you end up closing.

     You now have made three mistakes and you were not represented by a professional in any of them. Let’s look at the same transaction without the mistakes and see if it works out better. Suppose you remembered reading in my newsletter, not to go to the models without having us represent you and attend on the first visit. We registered you on your first visit and now officially represent you with that builder. We cannot alter any of their procedures for lot lotteries and contingencies but also they can not give preferential treatment to un-represented clients. As a result of consultation with my team, we guide you to another builder without quite as many restrictions or if we have to adhere to the no contingency procedure, we quickly get your home on the market at a rapidly changing fair market value.

     After we review the market value of your home, we determine that your home should be listed for $300,000. We put it on the market and after 26 showings in two days, I present you with an offer of $322,000 waiving the appraisal contingency and not asking for closing costs. The buyer is will to close and let you lease the property back for the new mortgage payment which is actually $140/ month less expensive than you current mortgage. So let’s do the math. You received $47,000 more for the house and save $140/month for 6 months or $840 Net to you is a plus $47,840. Got your attention yet?

     But there is more, remember that extra fee for their service.  That goes away netting you an additional $11,0000. Not done yet! This new buyer does their inspection and finds the same exact findings as the i-Buyer. This buyer has written 40 offers and been rejected 39 times. They let several items go and know that to return to the market and find another home will cost them even more money. They instead come to a negotiated settlement on the repairs either done in person or as a concession in the amount of $2500 which saves you an additional $17,500. Some of this willingness to negotiate is also benefited by my team of contractors who save both parties thousands on repair costs almost every time.  By eliminating the three mistakes of not being represented on the new build, selling to an i-buyer and not at least consulting with your neighborhood specialist, you saved over $75,000.  You don’t get to make many financial mistakes of this magnitude in your life.

For great service and professional representation, give the Al Gage team a call at 623.536.8200 or email us at al@algage.com

What to Expect in 2021

   “Economic predictions are tough to get right, and after a tumultuous 2020, the predictions for 2021 are a bit of a question mark. For example, some experts see a rapidly expanding economy in 2021, while others warn of a double-dip recession. Some see a stock market continuing to make new highs, while others rely on historical patterns to suggest 2021 might not be all that spectacular.” That is what an article from Yahoo finance said.

   With current stimulus and unemployment extension on the way, there have also been many promises of further stimulus and even student loan debt forgiveness on the way. Regardless of you political affiliation, no politician wants to be labeled as the one that destroyed the economy so it is my belief that the government will do everything within its power to keep our current vibrant economy going. That being said, let’s narrow the discussion to the real estate market in Arizona.

     It is a common quote that “all politics is local.” This sentiment is also true for the real estate market. Local market conditions and external economic factors vary widely from one real estate market to another. Here in Arizona, the market for resale and new homes continued to be strong throughout 2020 despite huge external disadvantages.

     The market maintained itself despite a doubling of unemployment. While the unemployment numbers have recovered a bit here, places like Las Vegas and other tourist driven locales continue to see excessively high unemployment. We are not one of the major airline hubs that will see a huge downward spike due to airline job cuts or manufacturing cuts due other large industries in the area. At least in this area, there should be no economic factors to drive our market down.

     The pandemic itself has also seemed to have no effect on the market here in Arizona.   It has eased up our traffic somewhat on the roads but not in the homes! We are still seeing ever shrinking days on the market, increasing prices and a situation where demand dramatically exceeds supply in both the resale and new home market. There are still lotteries for the new home builds and multiple offers on almost every home under $400,000. There are exceptions to this situation but that usually involves an agent who prices a home so high that even it will not attract a buyer.

     This non-existent effect of the pandemic is now history and does not necessarily predict the future. The market maintained or grew rapidly despite there being no proven evidence that a vaccine could be developed in less than a year and no determinative end in sight. Now that the vaccine is being rolled out and there appears to be an end in sight, this should only further stimulate our market.   

      Let’s analyze factors that could influence the future real estate markets on a local level. 

Interest rates don’t appear to be going anywhere fast so that should do nothing but to further assist the market in continuing in an upward fashion.  Rates may vary slightly from month to month or even day to day but long term they do not appear to be moving substantially in either direction. Currently rates have come up slightly since the all-time low but rates under 3% are still available and this is still a great interest rate.

     Demand shows no sign whatsoever of slowing down.  I still have many buyers who either have not found anything they like in the current market or need seller’s assistance to complete their purchase.  The practice of seller assistance is almost non-existent at this point, so those buyers are having a very tough time.  Many of them have written over 40 offers without even a hint of an accepted offer.  Unless something happens to slow this demand down, these buyers may just have to wait for the market to return to some semblance of normalcy.

     I have stated it many times but the major difference between the current extremely hot market and the market that eventually crashed in 2008 is that this market is composed of very real buyers looking for homes in which they can live.  The opposite was true leading up to 2008 where most of the buyers were buying to make a quick speculative profit on the resale of the home after a few months.

     There also does not appear to be any great expansion of the new home market which could alleviate some of the supply problems we are currently experiencing.  I am not aware of any new major projects being opened any where near our neighborhoods that would significantly impact the supply of homes available. 

     More than anything else, there seems to be a supply of something more important than any of these economic factors.  That something is a little thing called “hope.”  Hope that soon this pandemic will be at least mostly behind us.  Hope that we can return to our normal everyday lives without fear of the hospitals being out of beds or health care workers being so exhausted they cannot work anymore.  With all this being said, it does appear that our market will continue on its current path.  Even if it does not stay red hot, a little slowing would only help to balance the market a bit so that some of the buyer’s in need of assistance could purchase a home and the buyer’s who don’t need assistance would have a few homes from which to choose!  I think we will be just fine!

 

If you need a realtor that has ridden the up and down roller-coaster of our market for decades and knows how to navigate any turn which may be coming, give our team a call at 623.536.8200 or email us at al@algage.com

 

 

The Hiccups in a Transaction!

I am sure many of you have heard of many horror stories about what can go wrong in a transaction.  The difference between a great real estate agent and an average one is their ability to navigate these problems.  The reason I used the word hiccups is because in most cases, while a hiccup in a transaction can be very annoying, it generally does not prove to be fatal.

     For Buyers:  I am sure many of you, in prior transactions, have been told as a buyer to not do anything to alter your credit in any way.  Yet, almost every year, we are on the other side of a transaction where the buyer goes out and buys furniture or shutters for the home they are about to buy on credit.  Sometimes they even buy a truck to help move their furniture. This usually leads to a debt to income ratio problem with the lender which, if it cannot be overcome, leaves the buyer with new furniture, shutters and a truck with no home in which to place them.  This is easily overcome by simply counseling the buyer to wait until after the closing to perform any of those tasks. Please do not fall into the trap that since your loan is already approved, they won’t see the credit inquiry or loan at this late point.  There are quality control and last minute audit precautions in place for just such an occasion by the lenders.

     One that is a little more subtle is in verifying funds to close.  I think most people understand that you cannot borrow your down payment or closing costs although in some cases they may be gifted.  The problem occurs when verifying the source of funds in your banking accounts.  Aunt Bonnie (I just love the commercial where they have an ant problem, the clogger problem and the neighbors fencing problem), trying to be helpful, sends you a check for $3,000 (to pay for the shutters) (I shudder to think what we paid for our shutters).  When you deposit that check into your account 6 weeks before closing, it will show up on your bank accounts as an unusual deposit requiring an explanation for the lender.  It may also require a verification from Aunt Bonnie including her bank accounts.  At this point Aunt Bonnie may not be so willing to help by providing a verification of her bank accounts.

     Another major hiccup for buyers can sometimes be verification of their tax returns. As part of that mountain of paperwork that you sign with you loan application, there is a form called a 4506-T which authorizes the IRS to send copies of your last few tax returns to the lender for verification.  Sometimes, this can be delayed due to government shutdowns or just general tardiness on behalf of the IRS which causes a fixable but still annoying hiccup in a transaction.

     For Sellers:  The major unsurmountable problems in a seller’s closing generally have to do with title defects such as estate or vesting (how title is listed on the deed), divorce problems and liens either properly or improperly filed against a home.  If you have a common name, it will be very common to have to clear a lien by someone with the same or similar name and this is usually very easy.  The rest of that list is the subject of an entire other article.

     Many of the problems in closing a home are condition problems, both known and unknown.  In all of our neighborhoods, the air conditioning units and the roofs are approaching 20-25 years old if they have not been replaced.  The air conditioner can be handled by listing coverage from a home warranty company. Although, in most cases, they will not replace the entire unit.  Nothing will destroy a transaction faster than an AC unit dying three days before the close of escrow.  The roof is a little more predictable and should be inspected and repaired if necessary prior to placing the home on the market.  This will avoid costly last minute repairs and the difficulty of obtaining a roofing contractor within 30 days.

     More common hiccups are some of the small things that never get utilized or changed until you are ready to move out.  It is very common for a shut off valve, either on the washing machine or behind the refrigerator to be dysfunctional and never discovered until the items are disconnected to move them out of the home.  Obviously, this is not an expensive repair from your plumber.  The exception is that they also have a tendency to fail 24-48 hours after you disconnect them which sometimes leads to an entire home water event which can be disastrous.  My recommendation is to have these checked by a plumber either before the home is listed for sale or at least immediately after they are disconnected.

     Another hiccup can be the premature disconnection of the utilities.  It is not uncommon for a seller to disconnect the utilities when they move out a few days before the closing. It is not uncommon for closings to run a few days beyond the scheduled time as well.  The problem is that the standard AAR purchase contract requires the utilities to be left on UNTIL CLOSING regardless of when the original closing date was scheduled. This is primarily so that the  buyer can perform their final walkthrough to determine that the home is in the same condition as when they viewed or inspected the home and that all repairs have been completed.  This hiccup is fixable but generally costs the seller hookup fees to the various utilities. Remember the City of Avondale Water Department is closed on Fridays.  Again this one is cured by proper agent counseling in advance.

 

If you want an agent that has the magical cures for all cases of the hiccups, give us a call at 623.536.8200 or email us at al@algage.com     

Appraisals are Becoming a Problem!

You have heard me talk about how hot the market is for the past three months.  Despite this being the case we are not seeing a great deal of all cash transactions that do not require an appraisal. One thing that is threatening to slow the market down is the inability to obtain an appraisal high enough to  consummate the transaction.  An appraisal is supposed to, by definition, determine the market value of a property which is defined as what a ready, willing, and able buyer and seller agree upon.  The reality is  that an appraisal is designed to protect the lending institution

     You have heard me talk about appraisal contingency waivers but generally they are limited waivers.  What that means is that the appraisal is waived as long as the home appraises for at least an amount within so much of the sales price.  In other words, if the buyer agrees to pay the sales price or up to $15,000 over the appraised value whichever is less, then the transaction will proceed. I have had two instances where we were exactly in the position in the last month.  In one transaction we represented the buyer and in the other we represented the seller.

     In the transaction where we represented the buyer, the home appraised for $18,0000 less than the agreed upon sales price.  The buyer and I reviewed the appraisal and the comparable sales and could not find any real basis to challenge the comparable sales being used because there were a very limited supply of comparable sales and the methodology of the appraiser appeared to be sound.  We also made the decision that it was not possible to find another home in the same location and condition for less or equal to what we were paying, and that the appraisal was not an accurate representation of the current market, so we decided to proceed.  The seller agreed to lower the price from the $18,000 over appraised value to the $15,000 which we had agreed to pay and we proceeded with the transaction.

     In the second scenario the roles are reversed but the circumstances are essentially the same.  The buyer had agreed to pay up to $15,000 over the appraisal or the sales price, whichever was lower.  The appraisal on this one came in at $28,000 less than the sales price and $13,000 under the list price.  When the seller and I reviewed the appraisal we found several methodological errors, in my opinion, by the appraiser.  The first of these errors that they utilized comparable sales more than 6 months old AND place the most weight on these sales.  Six months old in this market is an eternity.  It is within their guidelines to utilize these comparable sales if there is nothing else.  In this particular appraisal, there were more recent sales that did support the list price which were utilized but as I said, the older sales were used more heavily in the weighting of the appraised value.

     The other major flaw in the appraiser’s logic was that they didn't make any adjustment to any of the sales based on the age of the sale.  I believe this to be somewhat of a discretionary call on the appraiser’s part but it is just not logical, if you have studied the market the way I do, to come to this conclusion.  Of course, I thought to myself, the appraiser is never going to take my word for it, so what do I do?

     I thought about it overnight and realized that I had two recent sales, one pending and one closed in the same subdivision that might have ammunition for me to use.  I obtained the two appraisals and low and behold, the appraiser had adjusted all of the sales in both of those appraisals for the ages of the sales.  This clearly indicated to me that the appraiser was mistaken.

     When I analyzed those two appraisals and average the adjustments for time, it worked out that the appraisers had used just under 1% of the sales price per month of age of the sale to adjust for the time that had elapsed since the sale.  I applied that amount to each of the sales listed in the appraisal as comparable. Voila! The appraisal then fell right in line with the list price.  On that basis, the buyer AND seller agreed to challenge the appraiser’s estimate of value and this process is ongoing.

      Not many real estate agents know the correct methodology and logic to use in challenging an appraisal.  In fact, many agents do not even conceptualize, beyond complaining about it, that an appraiser is not the absolute final arbiter of value.  I have done it many times.  While it is only successful about 20% of the time for me, it is still a useful tool that only the best real estate agents possess.  Both of these transactions would have failed if I had not been able to logically evaluate the appraisal and explain it to my clients. 

For the same level of professional and competent representation in your next real estate transaction, give the Al Gage Team a call at 623.536.8200 or email us

The Market Kee[ps Charging

I am often asked “How is the market?”  My problem is I am starting to run out of adjectives to describe how good the market truly is for potential sellers right now!  For those of you thinking, we will just wait and let the market keep going higher, remember, you will not know it is over until after it is already over.  Admittedly, the election in November may have impact on the market but let me give you just a few sound reasons why it is NOT likely to have much of an impact.

     You would think with extremely high unemployment and job uncertainty, the market would have slowed a bit over the past three or four months but that certainly has not been the case.  I attribute this in a small part to the record low interest rates that we currently enjoy.in some cases below 3%.  I believe this is a contributing factor but the bottom line is that the answer is much simpler than that.  Demand grossly exceeds supply!  This will make the prices go up rapidly according to basic economic principles.  You may be saying, “Oh No!  Here we go again with the housing crisis of 2007-2008.”  The big difference having lived and worked through that time and this time, is that the demand in 2007 and 2008 was very artificial.  Many buyers were buying solely for speculation purposes and when they found they couldn't make fast money they rapidly bailed out of the market.  This drove us from very high demand to almost no demand in the course of a couple months.

This time does not appear to be the same.  The demand we are experiencing now is very real and almost entirely made of owner-occupied purchasers.

     With all of the economic uncertainty, you would think the market would have slowed down.  I just noticed yesterday, that since the onset of the pandemic, not a single person has called and said “I have to sell my house because I lost my job or part of my income.”  This is unusual over 6 months in any market, but it has not happened, and I apologize if you have suffered an economic hardship because of the pandemic.

     You may ask “How are these higher prices meeting appraisal?  The quick answer is that in many cases initially, they were not.  Since in many cases, the buyers had already written 15-20 offers on property well above list price, the buyer’s typically were paying the difference in cash which we are still seeing today.  Of late, this has not been much of a problem because we have seen a few things from the appraisers acknowledging how fast the market is moving in an upward fashion.  These include significant adjustments to sales comparables for age of sale.  In a recent appraisal, the appraiser adjusted $7500 up for a sale that occurred in May.  All the recent sales also help because they have all been at higher prices as well due to the demand.

     All of my recent sales have been at or above list price of the home.  Currently, the average amount above list price for the market is about $4,000.  This has come down somewhat in the past few weeks mostly because the listing agents are catching up with the rise in pricing.  A new little shift in the market is for the buyer to give the seller a concession towards their closing costs, perfectly reversing the trend that has been happening for the past 15 years, as an incentive for the seller to select their offer without any appraisal risk.  This puts more money in the seller’s net without having to have the property appraise for more or the underwriter approving the buyer paying the difference.

     If you want an agent that is on top of the current trends in the market, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

A Market We Haven’t Seen Before!

This market is absolutely out of control!   That is the first line of last months newsletter! Now that many of those have closed, the proof is in the pudding! These statistics also do not account for the age old agent trick of raising the list price to match the sales price when a property has been bid up over and above the list price. This is done in hopes of improving the chances of a good outcome on the appraisal. 

We are still seeing appraisal contingency waivers (a waiver of the escape clause for an appraisal that comes in low). These waivers require the buyer to bridge the difference between appraised value and sales price with cash out of pocket. 

We are also routinely receiving offers with escalations clauses. An escalation clause basically says that Buyer A will pay $500 more than the best offer received up to a certain purchase price. Without this being combined with an appraisal waiver or a cash offer, this type of clause can be somewhat meaningless.

We wrote an offer for a buyer last week and the home was listed for $340,000. We went $15,000 over list price and put both of the above clauses in the contract up to a max price of $365,000 so up to $25,000 over list price. The final contract price on that home was nearly $400,000 so we didn't get an accepted offer.

Here are the stats and discussion for each subdivision or block of subdivisions.

For Corte Sierra which includes Corte Sierra, Las Palmeras and Sage Creek. Single Level Homes sold for an average sales price of $5,183 above asking price with the lowest amount being $3500 under list price.. This represents $184.1 /square foot. This is a sharp increase in the price per square foot and the highest amount over list price was $10,500. Multi Level Homes sold for an average amount over list price of $5371 with the most over list price at $15,000 and the lowest amount being at list price. This represents $139.9/square foot and is only a slight increase.

For Crystal Gardens which includes Crystal Gardens, Crystal Ridge, Crystal Point, Crystal Park Estates, Donatela Phase One and Upland Park. Single Level Homes sold for an average of $9750 avboe asking price with the lowest amount being $8,000 under asking price. This average may be a little skewed by the fact that one listing sold for $33,000 more than asking price. This represents an average of $162.4/square foot.. Again, a sharp increase in the price per square foot. Multi Level Homes sold for an average of $10,500 over list price or $124.8/ square foot. Since this only represents a single sale, the statistical significance may not be all that high.

For Rancho Santa Fe which includes just Rancho Santa Fe. Single Level Homes sold for an average sales price of $3620 above list price with the highest price being $15,500 over asking price and the lowest price being $5,000 under asking price. There were two that sold under asking price so that lowered the average somewhat. This represents $150.50/square foot. Multi Level Homes sold for an averages of $12,834 above asking price and all of them were over asking price with the lowest amount being $10,000 and the highest amount being $16,500 above asking price. This represesnts $151.40 per square foot.

For Wigwam Creek which includes Wigwam Creek South and Bel Fleur. Single Level Homes sold for an average of $43 less than asking price which is an anomaly in these statistics. The highest sales price was $10,000 over asking, which of course was my sale. These statistics are skewed to the negative by one sale that sold for $18,000 less than asking price on one of the higher end homes in Bel Fleur. This represents $157.30/ square foot. Multi Level Homes sold for an average of $3333 more than asking price with a maximum over list price of $10,000 and the other two selling right at asking price. This represents $114.10 /square foot which is typical as the much larger homes come into play.

For Garden Park which includes Garden Park, Palm Meadows, Palm Gardens and Donatela Phase 2. Single Level Homes at $4,000 less than asking price but since there was only one sale this is not statistically significant. This represents $153.30/ square foot. There were no sales of Multi Level Homes.

For Westwind and Glenarm Farms which includes all Westwind Units and Glenarm Farms. Single Family Homes sold for an average of $16,000 less than asking price but again this is only a single sale so it is not statistically significant. This represents $132.10/ square foot. There were no sales of Multi Level Homes.

 

In my over 35 years experience, I have never witnessed a market where the average sales price exceeded the average list price. Even though it would seem at this time, it is very easy to sell your home, it is still very important that you still utilize an experienced agent that can protect your interests and most importantly MAXIMIZE the price of your home. As you can see by the great disparity in some of the recent sales, choosing the wrong agent can disastrously impact your bottom line. It should be noted that all of my sales the last two months have average $12,500 over list price and all of those list prices were at the maximum available under current comparable sales.

 

If you want the highest price available for your home, don’t hesitate to at least interview us for the sale of your home!

 

Call Al Gage at 623-536-8200 or email us at al@algage.com

 

This Market is on FIre!

This market is absolutely out of control!  We are in such an undersupply of homes that the market is extremely brisk.  If you are thinking about maximizing your sales price of an existing home, the time is now!  Many of you may be thinking, well if I sell my home now, then I just place myself in the buyer pool to buy another one and will have the same difficulty as everyone else.  While true, we are countering that at the moment with mostly selling existing homes and purchasing new builds with lease backs on the existing homes to avoid a double move.

Here is what you can expect:

As a seller:  You can expect multiple offers over list price within just a few days of placing your home on the market. This may seem like a panacea for sellers and you can just ask whatever you want for your home but that is not necessarily the case.

Many agents treat this scenario much like an auction and let the home continue to get bid up like would normally happen at an auction.  They do this by the use of multiple offer forms which gives multiple buyers the opportunity to sign off on the best offer and then ultimately the seller makes a decision based on the strength of the offers.  This invariably essentially ends in a tie among many buyers leaving the seller little guidance on which one to accept.  At our team, I believe in allowing each buyer submitting an offer to improve their offer to their highest and best offer and then choosing from among those best offers.  I prefer this method because it is a positive approach rather than a negative approach.  Many times, if you ask all of the buyers to sign a multiple offer dictating terms, one or more of the strongest offers will not agree to those terms so now you are forced to choose from among weaker candidates who in their desperation to buy a home have agreed to the inflated terms.  The method of asking for highest and best, lets the buyer feel comfortable that the offer submitted is what they are willing to agree to as a maximum. They generally are expecting multiple offer situations in today’s market so they remain in the negotiations

     Even with this massive and overwhelming deluge of offers and buyer demand, the home generally does still have to appraise.  I have often touted my ability to improve appraisals by supplying information to appraisers that justifies the higher prices.  At the current time, it is my belief that while the appraiser may be influenced by the excessive demand, the market and/or appraisers simply cannot keep up with the rapid appreciation of homes we are seeing in the current market.  Many offers choose to waive the appraisal contingency which is a quite effective way to get the offer accepted but it remains to be seen if they will either actually complete the transaction or even have the real ability to do so.

With regard to the marketing time of homes, we have statistically seen the market time cut in half for all of our neighborhoods in the last month.  They have generally shrunk from 20 days to around 10 days on the market.  That statistic doesn’t accurately reflect the actual conditions of the market.  Many agents leave a home on the market  for 4-5 days before beginning the multiple offer process, usually resulting in 40 or more offers.  They then begin the multiple offer process which can also take several days.  In addition this figure is also inflated because of the way MLS calculates Days on the Market by continuing to count days for a home that has an accepted offer but  is still listed as taking back up offers instead of as Pending.

The bottom line as a seller is that you will be able to maximize your price in the current market!  This is not without some pain, there will be an absolute parade through your home for the few days it is actually on the market with agents standing in line at your door.

 Please resist the temptation to pick an agent based on the lowest price because this will only attract the weakest buyers and agents in an otherwise robust Market.  You need the professional and experienced guidance to wade through all of these offers and successfully negotiate the maximum return.

 

For Buyers:  There is obviously not much solace here for buyers.  I am currently working with one buyer who has written more than ten offers on properties.  All of the offers were over list price by at least $10,000 and not asking for any concessions or other perks.  All of these offers have been out bid.  Here are a few tips to improve your chances.

There is an inherent preference in the way that agents and therefore sellers view the various types of offers.  They prefer a cash offer over a conventional loan.  They also prefer conventional loans with their larger down payments over FHA/VA loans.  There may be a slight sliver of truth statistically of the ability to close in this order but I am not sure it is significant enough to justify the preference.

A buyer should offer around $10,000 more than the list price, pay their own closing costs and home warranty and comply with any other terms that the seller has requested such as closing dates and/or title company.

The more earnest money you can put down, the stronger your offer appears.  This does not put any more of your funds at risk unless you change your mind or waive some of the contingencies that are inherent in a standard purchase contract.  If you really want a particular home and have the capability to pay the difference in what the home appraises for and the purchase price in cash, a buyer can waive the appraisal.  I do not recommend combining large earnest money deposits AND waiving appraisals as anything less than a desperate strategy.

If you want an agent that has plied these waters of an incredibly hot market before, who will get the most for your home as far as the actual closing price,

Give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

 

 

 

 

Realty vs Reality TV

I recycled this article from 7 years ago this month because the same conditions apply and the TV advice is still being given.  I did adjust the costs and prices for some of the home improvement projects.

I am often asked by both buyers and sellers about something they have seen espoused on one of the numerous “documentary” or “reality” TV shows about  real estate.  I usually have to chuckle and then explain the “reality” of our current market.  For sellers, I am usually asked something like, we were told (which means they watched it on TV but don’t want to admit it) that if we paint the house it would add three times the amount of the paint job to the sales price of the home.  Or, if we knock out this wall and remodel this kitchen we can double our money.  In my experience, although each of these things will add value to the probable sales price of a home, they usually will not add enough value to cover the cost of these upgrades.  A pool is a perfect example.  The most value I have every received for a pool on an appraisal in recent years is $14,000 and there are few pools that can be installed for less than $30,000.

Another common misconception that I see portrayed on these programs is that a four bedroom adds $10,000 to the value of a home over a 3 bedroom.  This simply is not true.  Although a 4 bedroom may appeal to more buyers than a 3 bedroom, homes with more bedrooms and the same square footage do not sell for more money.  In fact, some of the smaller floor plans where the builder crammed 4 bedrooms into 1400 to 1600 square foot homes do not sell as well because the rooms are too small.  This misconception is very common in one of the programs based here in Phoenix.  This same program and many others also portrays investors purchasing homes site unseen and then flipping them for huge resale profits.  Many of these scenarios are absolutely true but they rarely show the bad purchases where the seller takes a bath on the home and loses a great deal of money or even worse consistently risks a couple hundred thousand dollars to make a profit of $5-6,000.  Basic investment strategy says that the risk is too high for the potential return.  In addition, these investments are best designed for individuals with liquid capital to RISK with experience in remodeling homes NOT the average real estate investor.  A real estate investor will usually do much better purchasing potential rental property and holding it for the long term or at least an extended period of time.  Some of my investors have doubled their overall investment and realized a 100 percent return on their actual cash return in just the past two years.  Whether that will continue to be the case can only be found in the infamous crystal ball.

On the buyer’s side, the reality shows often portray a couple purchasing a home with an agent that they have been recently introduced.  The buyer always has a wide financing range and usually has 3 very different home to choose from.  The agent typically either “overacts” for the program or they are the most phony and cheesy agents you have ever met.  If you require me to gush over the “lavish” and “extraordinary” 12’ X 12’ master bedroom with a tiny closet even though it is less than average, then I am probably not the agent for you.  I would characterize the bedroom as small and the closet as tiny.  Maybe that is too straightforward but if I have to sell you on the home, it is probably not the right home for you.

In these shows, the agent invariably allows the buyers to “sleep” on the decision for a few days or at least overnight.  This just is not realistic in our current market.  We used to have a quotation in our office that read something to the effect of “The home that you looked at and want to think about overnight, somebody looked at yesterday.”  This is very much the status quo in todays market.  On the shows they also typically go see the loan officer after a purchase contract has been accepted which also is just not realistic in this market.

Finally, I typically hear some bizarre “advice” that both buyers and sellers have received on negotiating techniques that I know come from the TV shows.  ( I can tell by the 5 year old saying “love it or list it” at every home.)  They commonly act as if there is a common amount that you should offer lower than list price and there should be at least two counter offers.  In today’s market, offering below list price (unless the home is overpriced) is frequently a  recipe for outright rejection.  Many buyers currently have written numerous, over list offers without even a nibble.

If you want Realty advice instead of Reality advice, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

 

 

Where Do We Go From Here?

I know many of you are tired of watching the depressing information coming across the newswires on a minute by minute basis.  I also know that most of you will not receive this article prior to Father’s Day but in writing this article prior to the day it has me reflecting on my parent’s generation.

We have just finished suffering under a more than two month lockdown of the entire country based on a pandemic.  This pandemic has resulted in more than 100,000 deaths and a job loss rate approaching 25 million and an unemployment rate thought to be on its way to 20%.  To everyone’s surprise, the jobs numbers added almost 3 million jobs in May  The stock market had dropped significantly and then recovered significantly.  There is political spin and impact at every turn based on every aspect of this pandemic and the governments’ reaction to it.  There has been abuse of power and wide variety among the state and local governments as to how to react to the pandemic.

Just as we were about to exit (at least temporarily) this long dark tunnel, the incident in Minnesota (which we can all agree was wrong) occurred and sparked widespread protests some of which devolved into looting and rioting.  Let me be clear, those are two very different things.  Every person has a right to protest and no one has the right to loot or riot.

The bottom line here is that both of these occurrences were thought to put the economy on the precipice of disaster. The housing market does not agree!  In fact there are significant signs that the entire economy is turning around. With regard to the housing market, there is no statistically significant impact on the market to this point that can be shown for either of these two earth shattering events.  All of the major housing stats in our area show either a steadiness or a slight improvement in the number of sales and the prices of the homes both of which are pretty typical for this time of year.

That level of stress that all of us are feeling about what will happen next is very real and having an effect on all of us.  The fear of the unknown often paralyzes us into inaction but the general public simply is moving along with their lives as best they can.  I know this seems like trying times and the worst time to be alive which makes me think about the stories my father and mother told me about their lives.

     My father grew up in a not wealthy but not poor family in West Texas but the family did own and operate a cotton gin.  I remember a story of my father falling out of the top of the gin while working at about 13 years old and never telling his dad for two reasons: The first reason was he didn't want to endure the wrath of his father for disobeying and not being safe in the first place.  I never actually met my grandfather on my dad’s side but apparently this was wise decision on the part of my dad.  The second reason was that he did not want to incur the medical expenses or miss work that such an injury would incur to the family.  In light of these two reasons, he simply endured the pain and suffered through his injury without ever missing a day of work, all for .50 cents a day.  I want you to understand that this occurred in 1933 which would have been the approximate height of the great depression and may help to understand why a 13 year old would press through an injury instead of going to the doctor.

    Eleven or twelve years later, my father found himself wounded on Leyte Island in the Philippine Islands as a result of a Japanese .31 caliber rifle round and numerous shrapnel wounds all for $21 a month.  It took more than 24 hours for him to be evacuated to an aid station to the best of the memories he shared (he never liked to talk about his time in the war).  He was eventually evacuated to a hospital near San Francisco where he suffered a severe infection and a partial foot amputation.  He was also involved in the trial runs of the use of penicillin and later suffered from a severe allergy to penicillin due to the over application of the drug.

After the war, he left West Texas and drove West until his allergies (to other pollens) eased up which led him to stop in Avondale in the early 50’s. He owned and operated a couple of garages as a mechanic and eventually signed the Avondale City Charter as a Charter Member.

My mom grew up very poor. They migrated to Arizona from Oklahoma as a result of a combination of the dust bowl and the depression.  She lost a sister at age 3 from Diphtheria (which she also had) and was widespread at the time.  Interestingly enough, it is almost unheard of now, due to a vaccine and other medical treatments but it was deadly at the time.  As a teenager, she picked cotton along with her parents matching their production of about 200 lbs. of cotton per day.  She went on to work behind the scenes as a bookkeeper (in the most flawless handwriting you have ever seen) and parts store manager for their garage and auto parts business for almost 40 years.

     The point I am trying to make is that they never gave up on the American Dream.  Work hard and honestly and you will succeed.  I fully understand that some people in America may not have the same level of access to that American dream due to inequalities.  The bottom line here is that even in these areas, America has made progress towards forming “a more perfect union.”  It should be noted that the preamble to the constitution does not mention that they have formed a “perfect union” only that we are continuously striving to do so. I do not profess to understand the tribulations of my fellow man.  I do know and believe that if I exercise the work ethic given to me by these two exceptional individuals that I have a high likelihood of being successful.

 Our current real estate market is an expression of the faith that our community has in America.  It has shown little or no slowing whatsoever.  This is a function of the confidence that despite the two current tragedies, the country will get through the crisis and emerge both stronger and more equitable for all!

 

 

 

     I am and always been a hard working patriot to our country including some of its flaws.  If you want a hardworking, experienced professional real estate agent to work on your behalf?

Give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

 

 

 

 

How the Housing Market Adapts

I am sure many of your are somewhat uncertain as to what is occurring with the virus and the impact on the real estate market.  This article will be about the actual mechanics of buying a home and how the real estate market has already or is in the process of adapting to the pandemic. Some of these changes were implemented or were common well before the onset of the pandemic but you may not have been aware of them.

  As far as the condition of the market, it is still too early to glean any kind of trend from the recent sales due to a lag time between contract acceptance and closing.  As of the beginning of May, I can see very little impact on home sales in our neighborhood that do not exceed the normal ebb and flow of the market.

Lets start with the listing process and work our way all the way to closing.

 In the past we have always appeared personally for a listing appointment and that part of the process has not changed.  As a real estate professional, I have an obligation to inspect the property for any obvious signs of water or other damage or anything that could be considered to be a red flag.  There is no practical way to do that without viewing the home in person.  The major difference is that we will break a 40 year old habit and not shake your hand when we meet you where generally we will sign papers at that point in person but maintain social distancing as best as we can.

     From this point the process is altered just a bit.  When the photographer comes, he will require that the seller not be in the property, access the home via lockbox, take truly professional photos and exit the home without making direct contact.  The photographer will require that all lights be turned on and doors to closets and bedrooms be open at the beginning of the photo shoot.

When it comes to showing the home to actual buyers, the situation has changed just a bit for both buyers and sellers.  For seller’s, we will ask that they not be on the property while the buyer views the home.  The truth is that we have been asking seller’s to do this for many years but for a different reason.  Buyer’s have always felt uncomfortable to speak freely or take their time looking at a home when the seller’s are present.  The added benefit of being socially distant, which is now required, only enhances this proposition.

From the buyer’s perspective, it will also look a bit different.  Traditionally, we have always driven potential buyers around in our car but the significant change is that now we require the buyers to drive their own car and follow us from property to property.

    One of the oddities of this crisis is the increasing number of buyers who are buying properties based on the pictures and/or virtual tours of a home.  The major change is that before the crisis, this practice was somewhat frowned upon by many agents as being a less secure offer for their seller to accept.  I believe this perception to be changing because we just got an offer accepted on a property where our buyer had never toured the home.  They viewed the home during the inspection and then proceeded with the transaction actually incurring no more risk to the seller than normal because the buyer could have backed out any time during the 10-day inspections period. 

     Another oddity of this crisis is a self imposed spacing of appointments to show a home.  In the past, we would approve all showings of a home, especially if it is vacant.  We are now instituting a policy of having appointments no more frequently than one per half hour. On very popular listings, this is to avoid a crowd gathering at the door to view the home.

     Open houses are one of the services that simply cannot be offered at this time.  I stumbled onto a statistic very early in my real estate career that basically said the chance of selling the home being held open via an open house is less than half a percent. I have thought throughout my career that the chance of selling a home via an open house did not exceed the risk of just letting anyone off the street to come in a n view a home or in essence case the home.  Admittedly, they can do that online with all of the technology available but one half a percent just does not justify the time and expense.  In my entire 35 year career in real estate, I have sold exactly one home off an open house and that was because the actual listing agent had underpriced the home by about $20,000.  It was also my first home.

     As far as personal protective gear, we will wear a mask and gloves at either listing appointments or showings upon request the same as we would with a common request to remove our shoes when entering a home in the past.  We also like to inquire if anyone in the home has any of the risk factors associated with the virus.

The same rules apply for the next steps in the process.  The home inspector and the appraiser will require lockbox access to the home and that the seller not be present.  When the buyer arrives to go over the home inspection, masks and gloves should be worn by both parties as they see fit.

     All of the paperwork necessary to satisfy all of the other requirements of the transaction can be done electronically as long as the parties have a valid email except for the final notarized signatures.  The parties, in almost all cases, can complete the real estate side of the transaction without the requirement to be able physically sign and scan a document.

     As far as the lending side of things, that too can mostly be done with an email address and a credit card.  An exception to this that may require the use of a scanner on the part of the buyer would be to upload documents such as letters and bank statements that can not otherwise be documented without a paper copy of the document. 

     Lenders, title companies, underwriters and many other facilitators of the transaction process are also mostly working from home as are we!  This  is not that uncommon of a change, although we do find that sometimes this can lead to a slight delay in the closing process due to bandwidth and/or other complications of items not being performed in an office.

     For the actual closing process, you will still likely have to appear before a title officer.  Prior to the pandemic, it was becoming more and more common for the signings to be performed by a mobile notary that would bring the documents to your work or home, witness your signatures and then return the documents to the lender.  This practice has been widespread for buyers prior to the onset but is becoming increasingly the norm for sellers as well.

     With these few exceptions and hopefully the real estate market continuing to hold, VERY LITTLE has changed in the real estate market.  These changes are a small price to pay for attempting to keep people that you may or may not know safe from this horrible virus!

     If you want an agent that can adapt to the changing times and still represent you in a professional, aggressive and ethical manner,

Give the Al Gage Team a call at 623.536,8200 or email us at al@algage.com

 

 

 

 

The Real Estate Market and Covid 19!

I am getting bombarded with questions about what the current concerns over the Coronavirus is going to do to the real estate market!  Most of the information I am about to present is anecdotal and at this point, NO ONE really knows what the actual effect will be!  I fully acknowledge that what I am currently writing may be completely wrong in 3-6 months.

    First let’s examine what the state of the real estate market was at the time of the onset of the pandemic in Arizona.  We were (and as far as I can tell still are) in an extreme undersupply of homes.  At the time of the onset, many buyers were having to write as many as 15 offers at or above asking price with no concessions in order to gain acceptance of an offer.  It was very common for a home to receive up to 10 offers within the first few days of a listing.  Another way of looking at this is essentially, there were 10 buyers (especially in the lower price ranges under $250,000). For every listing that came on the market.  If you consider that multiplier valid, the buyer pool would have to shrink to 10% of its former level to bring the market to equilibrium. 

     I am sure that a certain percentage of the current buyer population will be affected by the loss of a job or temporary layoff so let’s cut that figure in half to 5 times as many buyers as sellers.  On the opposite side of the spectrum, let’s make an assumption that a significant number of regular homeowners and investors, either because of the loss of job income or simply panic in this situation decide to put their homes on the market.  Lets assume that the current inventory doubles in the next few months.  That would divide the number down to the point that there would still be 2.5 times the number of buyers to sellers.

   Now I realize I have made a lot of assumptions in arriving at this conclusion.  There are somethings that come to mind that could really impact all of these assumptions.  One concern that has been raised is that these potential gaps in employment may prevent buyer’s from buying for up to a year.  I spoke to my good friend Rita for an explanation of how this could impact potential buyers.  Of course this assumes that once the virus abates, they will get their jobs back!  She said that the gap in employment is only a problem if it was due to their conduct or is not explainable.  I believe that being laid off as a result of a total statewide shutdown of your industry is likely as good an explanation as any buyer could ever have.  IF the mortgage industry is to survive, I would suggest that they are going to have to be willing to accept this particular explanation. 

     Another scary situation, and what I hope is actually a vicious rumor, is that appraiser are devaluing homes based on the corona virus outbreak.  Admittedly, I am not an appraiser but this would seem impossible to do based on any demonstrable change in the market at this point.  It may be possible to make such an adjustment down the road when a demonstrated effect on the market can be shown the same way they do with either an appreciating or depreciating market.  At this point, I can see no statistically significant change in the real estate market so this remains to be seen.  An appraiser should not be making adjustments of this sort based on anticipated changes in the market without any kind of a trend line to justify the adjustment.  I would not hesitate to challenge this assertion should it come up on an appraisal for one of my clients.

    In 2008, we saw a huge crash based on a variety of other factors that simply were not present at the beginning of this crisis.  That dip lasted almost 5 full years before the housing market fully recovered and we are still suffering under some of the vestiges of that crisis such as a three day waiting period to fund a loan and excessive verification of the source of funds Of course the economic recovery will depend on how long the current situation lasts! 

Let’s analyze the factors from the Federal Government that may help to mitigate the economic dip that we simply didn't have back in 2008. The CARES Act (Coronavirus Aid, Relief, and Economic Security (CARES) Act,) authorizes the following relief. First of all the Stimulus Package of up to $3200 for every family of 4 making under $148,000 will certainly help mitigate the situation but of course could not be a long term solution should this crisis last into the summer.  Of course more stimulus may be coming from Congress but this is what we know now.

The Payroll Protection Plan, which is a loan available and guaranteed by the SBA (Small Business Administration) may actually save the day. It provides for a small business owner to apply for a loan of up to 2.5 times their monthly expenses and income. If those funds are utilized on qualified expenses, then the loan will not have to be repaid.  Essentially this will allow businesses with less than 500 employees to  stay in business for the next 2.5 months without being in business.  Essentially, they will be able to (and must to avoid repayment) continue to pay their employees their salaries, their rent and/or mortgage and other qualified expenses.  This is true even if they are sole proprietorships and/or personal corporations.  If this program is fully implemented and does not run short of money, it should  essentially mitigate the effects of this crisis to small business for the next 2.5 months.  Of course this assumes that it can be rolled out and implemented in a timely manner.

     If the crisis runs beyond 2.5 months, it will be a Herculean effort to jump start the economy.  Another part of the economy that goes un-noticed is the sectors that are overwhelmed right now and will be forced to hire additional staff.  Grocery store workers, essential medical professionals, infrastructure providers (I am sure every Net Flix and any internet provider is on overload right now), supply chain vendors and any of the essential needs of the economy will be either expanded or other industries re-purposed to fill in the slack.

     Right now areal estate agents along with members of the legal profession are considered essential personnel and so we still be available to show homes and make the other arrangements necessary to close on your dream home or the sale of your existing home. We are taking the appropriate medical precautions and doing as much signing and showing remotely as possible.  Please forgive me if I don’t shake your hand when we meet which is very difficult having been trained to do so since I was five years old! We will likely meet you at the property, maintain our social distancing and still be able to obtain a high price for you listing or negotiate a good price for you purchase!  I think the market will be just fine!

 

For the ultimate in social distancing while still getting your home sold or your new buy in escrow, call the Al Gage Team at 623-536-8200 or email us at al@algage.com

 

Who Pays What?

Whenever you close a transaction there are may fees that come into play many of which you may be unfamiliar.  Here is a short list of the fees common to almost all transactions in todays market..

Title Fees:  The title company charges a number of fees for their services that many are familiar with but some may not be.  The title company passes on a Recording Fee which is what the Country Recorder charges to record the documents upon closing. This fee is normally less than $75 and paid by the seller. The Title Company may also charge a Mobile Notary Fee which is the fee that the notary charges to come to your residence, place of business or other location to sign the documents and return them to the lender.   This fee is less than $200 and paid by the party to the transactions that utilizes the service.  The title company will also charge a Reconveyance Tracking Fee, which is normally less than $100 to ensure that your existing lender actually shows that the loan is paid off after closing.

The Escrow Fee is the fee that the title company charges to prepare all of the forms, track and disburse funds and perform the actual work of the title company’s transaction.  This fee is split between buyer and seller equally

Title Insurance:  There are two different forms of title insurance applicable to most transactions.  There is the Owner’s Title Policy, paid by the seller, which ensures the buyer that the seller has clear title to convey.  If the buyer is obtaining a new loan, then the buyer also has an American Land Title Agency Policy that ensures the lender that the title is free of defects so they will lend on the property.  There are also some miscellaneous endorsements that can arise but they are too specialized to be incorporated in this discussion.  Many title companies offer a discount if you own more than one property in Arizona also known as an Investor Rate.

HOA Fees:  Homeowner’s Associations vary widely on what they charge.  By Arizona Law, the seller is required to pay the Disclosure Fee for the buyer to receive and approve copies of all the documents relevant to the HOA.  By statute, this fee cannot exceed $400.  Many HOA’s also charge a Transfer Fee to change the identity of the owner to the new property owner’s name.  This fee is not regulated and who pays this fee is an item of negotiation which can be paid by either party to the transaction.  Many HOA’s also charge a Capital Improvement Fee which can be called by many different names such as Working Capital Fee, Community Reserve Fee, Asset Improvement Fee, or Future Improvement Fee all of which can be as much as several thousand dollars.  All of the HOA’s in our area keep these fees to a minimum but areas such as Verrado and Pebble Creek see these fees in excess of $2,000.  Specifically in Verrado, the Community Enhancement Fee is 1/2 of 1% of the sales price of the property being sold.  All of this groups of fees are items of negotiation and can be paid by either party.

Think that is bad enough?  Many properties have multiple associations.  They are listed as the Home Owner’s Associations and a Master Association and some or all of these fees can and do apply to both Associations

Prorations:  There are basically three prorations that come into play.  The first is the HOA Proration.  Assuming you close on the 15th of the month and the HOA fee is $30 per month, each party will be charged $15 for their half of the month.  All prorations are based on a 30 day month even though some months have more or less days.

The next proration is a bit more complicated and involves the Property Tax Proration.  When you pay your taxes in  March, April or May (many times from the impound account in your mortgage) you are actually paying for the second half of taxes for the previous year.  Assuming you closed on March 15th, you would owe the taxes for the second half of the year before PLUS the prorated amount from January 1st to March 15th as the seller.  The buyer would owe the taxes for the balance of the year.  It is very common for a seller to tell us the taxes are paid and then they are surprised when they owe 8 months of taxes even though they have paid the most current tax bill.  If you impound your taxes, this is usually offset in the form of a refund from you impound account that arrives 4-6 weeks after closing.

Interest Prorations function in much the same way!  Interest on the seller’s loan(s) is charged through the date of closing and is always in arrears.  This means when you pay the April 1st payment, you are paying interest for the month of March.  For the buyer, they pay interest in advance for the rest of the month and then the next month is paid at the subsequent payment.  If you close on March 5th, generally you are charged 25 days of interest up front and then pay the next 30 days of interest when your first payment is due on May 1st.

 

Lender Fees:  Lender fees vary quite widely and are called by many different names.  I will highlight some but not all of these fees.  Basically, call them what you may, they all contribute to the amount of money that a lender makes as profit and contribute to the different between the Note Rate and the Annual Percentage Rate (APR)  Some of these fees include the Appraisal Fee, which is generally paid by the buyer and can run between $450 and $650.  It should be noted that except FHA loans, appraisals are not longer transferrable between lenders so make sure this is the lender you are going to use before you order an appraisal.  The appraisal is an upfront fee and usually paid separately which cannot be recouped if the property fails to close.

The lender’s also charges a variety of fees such as Document Preparation Fees, Underwriting Fees, Origination Fees and Processing Fees which have always been characterized in the industry as Junk or Garbage Fees.  They are simply extra income for the lender. This is where some of the misleading advertising you see on TV comes into play as they advertise a very low rate and then have exorbitant junk fees to offset the pricing. My lender doesn't charge any of these. On the other hand, Discount Points are a more straight forward way of pricing the mortgage on your potential new home.  Discount Points are the fees charged by the lender to get a lower interest rate.  For instance, if 3.5% is the market rate, you may be able to get to 3.0% by paying 2 discount points or 2% of the loan amount to obtain that rate.  Since this  drops the payment on a $300,000 loan by $83 a month at a costs of $6,000, you will not recover your money for 6 years.  Since most people move every 5-7 years, this gamble rarely pays off in the long run.

Professional Service Fees or Commission:  At least we as real estate agents let you know up front what our fee is and then only call it one fee!  While rates are always negotiable, the better agents always negotiate less than the less experienced ones.  Be wary of these advertised rates as low as 1 or 2%, they simply cannot market your home and get the highest possible price for that amount of money.

If you want professional assistance navigating this quagmire of fees and charges, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

 

 

The Snags in a Transaction!

Selling a home isn't what it once was!  Solar leases, roof repairs, termites, appraisals as to value and condition, and complex lending regulations all play a more significant role than they did even 5 years ago.  It is important that you hire a real estate agent that does enough transactions to be up to date on these tribulations.

    Let’s start with solar leases!  Let me just say I am an advocate of solar power and its associated green implications and savings!  That being said, the way that it is marketed to the average homeowner is not always the best.  I don’t want to speak for the solar companies but I believe that they do not adequately explain what exactly is involved in a solar lease transfer at the time of the installation of the solar system.  Of course the other possibility is that it is explained and the homeowner simply does not understand the implications.  The major problem with selling a home and having the buyer assume the lease (because the buy out of the system is almost always cost prohibitive) is that the buyer must qualify for the lease payment with both the solar company and the lender counts the payment as a debt against the potential buyer. 

     The first one is usually not much of an issue because if the buyer can qualify for a loan they will also qualify for the solar lease.  The second one is a bit more of an issue.  Most people buy a home very close to the maximum that they will qualify for as far as price.  When the lender counts the solar lease as a debt against the buyer, it lowers, in many cases, the amount of home that a buyer can purchase.  It does not seem fair to me that the lenders count this as a debt when, at the same time, the normal utility bills of a home without solar are already factored into the qualifying ratios that the lenders use and are not taken as a debt. 

    There is also a significant portion of the population that cannot really equate the savings of a solar system with the monthly lease payments.  In other words, they simply do not see the value of the solar system in the first place and this actually hurts the sale of the home when an assumption of the lease is required.  While we have yet to see a transaction fail because of the solar, we do see many people ready to buy a particular home and then pass on it when they investigate the solar.  Bottom line, it just isn't for everyone!

     This brings me to the crux of this article.  In a recent transaction on a home with a solar system, it was discovered that the property needed a new roof.  All of our homes in the neighborhood are nearing that age where the felt underlayment is reaching the end of its life. In general, the cost to replace the entire underlayment and re-use the existing tile will run between $10,000 to $16,0000 depending on the size of the home and the amount of underlying plywood damage that has occurred.  I was totally shocked to find out that it was an additional $6-9,000 to remove and reinstall the solar panels. If you regularly read my newsletters, this is the most important advice I will ever give you!  Make sure if your are installing a solar system, that you have the roof inspected and it has at least 20 years of remaining life left on the roof at the time of installation of the solar system.  This is no guarantee that you will not run into the same problem, but at least it gives you a chance to avoid this costly replacement of a system you do not own.

     Changing the subject, the other major problem we are seeing is the lender requirements for a clean termite report.  You may think, in Arizona, we have subterranean termites and if you find them, you treat them and that is the end of that story.  Spend $500-$700 to have them treated and you are done.  Not so fast!  While it is true that it is pretty rare that our type of termites do any real damage, I have seen a home where the entire baseboards were destroyed by termites.  Most lender’s require a clean termite which means that all of the conditions conducive to termites are also remedied.

    These additional requirements beyond the treatment of the termites include excessive moisture and/or water stains which means any former leaks showing on the ceiling or especially under the sinks (many times it is a spill that is called as a leak), has to be corrected.  It also means that any leaks or excessive moisture in the eaves of the roof have to be corrected.

     Another common one is earth to wood contact.  This provides an avenue for the termites to enter the home.  This is commonly vegetation touching the home which simply needs to be trimmed back.  It can also be places where patio support posts actually touch the ground which is a more extensive repair.

     The one that is the hardest to define is improper grading.  Essentially, water must not pool against the side of the stem wall of the home.  There must also be a gap on the stem wall between landscaping rock and/or earth and the bottom of the stucco.  So if you have had a dog that likes to build a sleeping tub against the home or added too much landscaping rock this will have to be corrected.  Commonly, the original grading of the home was either improper or has changed over the years for a variety of reasons.  Often this is not simply a re-raking of the gravel but a whole new redesign of the slopes of the yard around the foundation.  Usually this can be done inexpensively but occasionally it can be a major repair.

 

If you want an agent that can identify problems before they become problems and knows the proper way to fix them and survive a transaction while at the same time delivering top notch customer service,

 

Give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

Average is Not "OK"

How does the old joke go?  What do you call the person that graduated last in their class at medical school? . . . . . . . . . . . . . . DOCTOR!  It’s a pretty funny joke but the reality is that it took a great deal of competitive and cognitive ability just to get into medical school, let alone graduate from it.  I just love the AT&T commercial that emphasizes this concept with the doctor that the nurses describe as “ok” and then it goes on to show a total lack of confidence on the part of the patient, nurses and the doctor!

     As I was preparing the end of the year statistics for all the homes sold in our neighborhoods, I was shocked that the vast majority of real estate agents had only sold one or maybe two homes out of the 10,000 in our neighborhoods.  I equate this to being “ok” at being a real estate agent.  They probably didn't get sued and nobody probably died, but for most of you the sale of your home represents the largest single financial asset you will ever own.  It does beg a few questions:

1. How much money did they leave on the table?  Negotiations and skill in this business is hard to come by.  I personally have over 34 years in the business and over 1500 transactions under my belt.  We recently had a transaction in negotiations where we had submitted a counteroffer to the buyer cleaning up a few minor details in the buyer’s original offer. Before that counteroffer was signed by the buyer, I received an offer that was almost $5,000 over list price and net to the seller.  Inexperienced agents would likely have had to call their broker to find out what to do and that delay could have cost the seller $5,000 while waiting for their broker to answer.  We immediately withdrew the first counteroffer (with the permission of the seller) and proceeded to accept the latest buyer’s offer.

2. How much money did they lose in the appraisal process?

Back to the same transaction, we now have an offer on the property that is over $5,000 over the listing price that was set based on the comparable sales of the property.  Another reason to use your neighborhood specialist!  When the appraiser reviewed the comparable sales for the property, I’m sure that the fact that two of the three best sales were also MY sales greatly contributed to onevery simple fact.  The appraiser had to take in consideration that I had participated in and viewed both of those other properties. The home appraised for the new higher list price!

     I am not saying that any of these agents didn't do a good job! But how do you know you’re not going to get just an average job1  At our team, we listen to our clients and try to guide them through the process based on years and years of practical experience.  Bottom line the statistics do not lie!  We have sold more homes in your neighborhood since 2014 than anybody in real estate!  This past year, we sold 120% of our next closest competitor and 214% of the average of our top ten closest competitor.  For the purposes of this argument, we are discounting the agents that sell to a single client investor or represent one of the I-Buyer’s as well as new home salespeople.  That 214% figure is based on the averages of the top ten closest competitors because I can’t even imagine the number of sales that the average agent sells in the neighborhood because there is no way to account for the ones that have zero sales.

If you really want to throw your equity away, call an I-buyer.  Yes, they make it simple!  Yes, they make it convenient!  More convenient than I can make it!  And their agents are really good, but they do not represent you or have an obligation to look out for your best interest. Is the $20,000 to $40,000 you will lose by selling to an I-Buyer really worth it for the convenience?

We also are not yes-people.  We try to explain to our clients what the realities of selling and buying really mean. We are straight forward on where to price you home!  We lose many listings every year to other agents that promise the moon as far as pricing goes, only to watch them whittle the seller down on price to the point where it is at or below what we know we could have obtained for the property!

     So back to our analogy, there really is only one way to ensure that you have chosen the best practitioner in your neighborhood. Choose the neighborhood expert.  You don’t want the person doing your surgery or the person fixing the brakes on your car to be a beginner, family friend, neighbor or friend of a friend.  You want them to have proven results that you can verify!

     Next time you go to the dentists or the mechanic or to your investment banker, ask them if you can have a no-obligation guarantee.  Our’s reads like this: “If you are not happy with our service you can cancel this listing contract without obligation until you have accepted an offer.”  Obviously, I cannot release you from the listing once you have accepted an offer because you are now obligated to a third party.

So if you are looking for a pilot that can land the plane, a surgeon that can guarantee a full recovery, a mechanic that can ensure that your car will run, or a quarterback that can complete the pass despite enormous pressure– Give the Al Gage Team a call!

For Exemplary Service, Professional Representation on a New or Resale Home AND to get the most money, net for your existing home,

Call Al Gage @623.536.8200 or email us at al@algage.com

Twas' the Night Before Christmas!

    Twas the night before Christmas and all through the neighborhood on almost every house,

Al Gage signs were popping up listed by him and his spouse.

 

The for sale signs were hung in the front yard with care,

 In hopes that soon a buyer would be there.

 

A buyer arrives looking for a home with 4 beds,

while visions of a pool and a fireplace danced in their heads,

 

Could they get their financing, call Rita Marie,

She’ll run a credit check and then we will see

 

An offer was written, full price not the cap,

Next step the seller “Why, gee I must accept!”

 

Who should we choose for title, Al recommends Patty Miller,

No extra work or paperwork for us, the service was killer,

 

Escrow was opened, earnest money was sent,

Al Gage had accounted for every last cent,

 

When out on the lawn there arose such a clatter…

The home inspector had arrived and threw up his ladder,

 

He found a bad window, broken roof tiles and a backsplash, the eaves need painting and a few outlets have a cross,

We find we can fix it with not too much cash,

Al knows the right people, we avoided taking a huge contractor loss,

 

Next is appraisal, Al’s favorite thing—

Comparable sales are provided, hopefully the appraiser will sing,

 

When what to my wondering eyes should appear,

The buyer’s loan approval with conditions to clear.

 

The conditions are clear and on to closing with a splash,

The seller gets the most money since the time of the crash,

 

Hardworking and eager, I knew to choose Al’s Team,

an expert in the neighborhoods, more sales to the extreme.

 

 

Contracts, CLUE reports, disclosures! What a list!

They handled it all but we got the gist!

 

 

Our house was sold it seems almost before he came,

When leaving he whistled and called them by name,

 

To Rancho, Now Corte, Now Donatella and Wigwam Creek,

On to Las Palmeras, Crystal Gardens, Westwind and Sage Creek!

 

For those with a porch but all have a wall!

Now dash away! Dash away! We’ve sold them all,

 

We will tell all our neighbors, family and even a friend,

The best services available, Al’s team doesn’t pretend

 

He sprang (spring might be an exaggeration) to his car as his phone gave a ping,

Off to sell the next castle, put up a sign and make his phones ring,

 

I heard him exclaim as he drove out of sight:

“Merry Christmas to all and to all a good night.

 

From my team of Rita Marie from Pinnacle Capital Mortgage, Patty Miller from Driggs Title and personally from our family, Terri and I, we wish you the best holidays of your life and ongoing prosperity and health for the new year.

 

 

 

 

The Do’s and Don’t’s of Negotiating in a Tight Market!

People, whether buying something at a yard sale, car dealership or purchasing a home cannot stand the perception of themselves as poor negotiators. In other words, almost all people THINK they are great negotiators. I don’t know if it is because they tried a strategy once and it worked, thereby re-enforcing the strategy, or because they read or heard about a strategy that someone else employed that worked. Most of the time, the story you heard about someone purchasing a home 20% under asking price was untrue to begin with and simply an embellishment of their negotiating prowess in any case.

Here is a list of Negotiating Do’s and Don’ts that are especially helpful in our current very tight market!

Don’t write lowball offers on a home you want to buy! I have heard over and over across my career that “All they can do is say No!” This simply isn’t true! When you write a significantly low offer it has a tendency to hurt your negotiating position. We recently had a person give a verbal offer on a property that was less than 70% of asking price. The seller will likely not sell to that person even if they give them their asking price!

Don’t negotiate verbally or via email! In addition to the above mistake, this person made the offer verbally.   No seller is going to take an offer seriously that is low or delivered verbally or via email (not meaning emailing a purchase offer) because it is not binding. Even if the parties agree, neither is technically obligated. Furthermore, with all of the complexities of modern real estate, it is impossible to cover all of the issues such as inspection, closing costs and HOA issues in a verbal or email offer. I think most courts would agree that no meeting of the minds actually occurred even if they came to an agreement.

Do write a competitive offer from the beginning! I have long been a proponent of the school of thought that your initial offer is the place to buy a home at the best price. Rather than submitting an offer that you know or feel they will counter, make your first offer good enough that the seller can’t take the chance of either rejecting it or countering it. If you doubt whether the seller will take your initial offer, you are probably right! Improve it! 

I am not saying to offer over what the home will appraise. Using a great agent can help you with that determination before you spend money on an appraisal or inspection. In this very tight market, your offer must be competitive especially with the possibility of multiple offers.

Do write a personal letter to the seller! In this age of impersonal emails and many government regulations dictating what we, as agents, can and cannot disclose about a buyer, a personal touch allowing the seller to get to know the buyer often goes a long way in the negotiating process, In multiple offer situations, it is even more important! I have witnessed situations in multiple offer situations where the letter alone won the day. The seller said, “we have 4 offers all about the same but I feel a connection to this one.” I don’t recommend sending pictures of your family with the letter because you never know what biases and stereotypes that may evoke from a seller.

Don’t get hung up on personal property or minor expenses!

Whether the seller is going to exclude the drapes or include the 15 year old washer and dryer should be irrelevant. In the grand scheme of things they just aren't that important. You may say well then I have to go buy those things! If they are willing to leave them, you may have to very shortly purchase new ones anyways! What is the significance of a $450 home warranty on a $300,000 transaction?

Do try to meet in the middle?

It is an age old negotiating tactic, but it works! Most of the time if the two parties are $10,000 apart and the counter comes back $5000 apart, both parties will agree. If it is slanted either way, the odds of coming to an agreement go down drastically.

Don’t let your emotions get in the way of effective negotiating!

Easier said than done! Buying or selling a home is an emotional transaction. The buyer feels like the seller is trying to take advantage of them at every turn and the seller feels like he is giving away the farm with every dollar they discount the property. Starving agents will often pressure a buyer or seller into executing a contract as soon as possible. I believe that sometimes sleeping on it over night pays off contrary to every sales manual ever written. With pressure, emotions are amplified which can lead to poor decision making!

Do negotiate with a knowledgeable, well respected agent! You usually cannot choose the agent and certainly not the buyer or seller on the other side of the transaction so it is very important that you have a pro on your side. Your agent’s reputation and skill in the eyes of their counter part may well lead to the success or failure of the negotiations. I recently had an agent send a cancellation intent. In two questions, I saved the transaction and we proceeded to close without any further concession by my seller!

 

If you want a pro on your side negotiating on your behalf, give the Al Gage Team a call at 623.694.9004 or email us at al@algage.com

 

Real Estate Articles?

As I read through countless real estate articles aimed mainly at the process of choosing a real estate agent, a common theme emerges.  Almost all of them advise you to ask a friend for a referral.  Admittedly, we get a great deal of our business from referrals from past clients but let’s analyze whether this is truly the best way for you to evaluate a potential agent?  First of all, the odds are that the agent your friend or family is referring to you has only completely one transaction with that agent.  If that agent is an average agent, they have done less than 10 transactions in a year.  Now they may be a great agent and they may have done a great job for your friend or family member, but the statistics just don’t back up this being a good way to choose an agent.

     We just completed a transaction with a client of ours that regularly refers clients to us.  This is his 7th transaction with us going back to 1994. This is the third time we have sold that particular home.  Another of our clients has successfully completed 8 transactions with us going back to 1989.  If this is the kind of referral you are getting from your friends and family by all means use that agent.

    We are not saying to disregard referrals from friends and family just to include us in the agents that you interview. Here are some good reasons to use the Al Gage Team:

1. Our team has spent more than $305,000 marketing homes JUST IN YOUR NEIGHBORHOOD, IN THE LAST 7.5 YEARS. We spend more than $3750 per month in marketing of the homes that we have listed.  This results in higher exposure and therefore, higher prices for your homes.  The old saying is that it takes money to make money and that means it takes money to market your home!

2. Our team has been the Number One Team in TOTAL Sales in your neighborhood since 2013! That’s correct.  No other agent has sold more homes in your neighborhoods during that time, not even 50% of the same number of sales.  We accomplish this because our marketing plan works and we have satisfied clients at the end of the process.

3. We have sold over 1500 homes in Avondale, Goodyear and Litchfield Park! I know this sounds like a big number but don’t you think it is in your best interest to interview us and find out how we are able to accomplish this number.

4. We are committed to and reside in your neighborhood!  Many other agents have attempted to become the “Neighborhood Specialist” in your area.  We have LIVED and SOLD here almost exclusively since 1999.  Having spent more than $300,000 to market to your neighborhood, we are not going anywhere , anytime soon!

5. We have longevity in the business and a stellar reputation! All of the other real estate agents know that we work in your area.  I recently submitted an offer on a home listed with another agent in the area and as I called them to tell them that I was sending the offer, he replied “Of Course it’s You!”. I was caught off guard.  He said “ I know that area is your turf and was surprised that I got the listing in there. “                                                           I have over 35 years in the business, the last 25 almost exclusively in Avondale, Goodyear and Litchfield Park.

6. Our negotiating skills, marketing, reputation and experience result in better offers and a better net to YOU on the sale of your home! We have more experience negotiating with other agents than anybody on this side of town. We are also skilled at backing up our case to an appraiser and making sure that if it does sell for more money we can actually get it to appraise and close at that price. Our marketing maximizes your exposure on-line,  through Facebook, via email and traditional tracks.  Our reputation generates better offers from other agents.  Bottom line, our experience almost always results in a better net to you as the seller.

7. We have an undeniable work ethic, answer the phone and leave no stone unturned to get your home sold!  If this wasn't true, how could we lead in all of these statistical categories?

 

If you want the best possible service to get your home sold for the most money in the shortest time, give us a call at 623.536.8200 or email us at al@algage.com

 

Do you really want or need an i-Buyer?

I just want to tell you a story about  a client we represented last month.  This particular client had interviewed all of the major i-Buyer companies about the sale of their home.  You know the ones that advertise that it’s the new way to sell real estate, you move whenever you want and it saves you the hassle of selling your home the traditional way!  Fortunately for this seller, he decided to get a second opinion from me on the sales price of his home.  The best offer he was able to get from any of these companies was $230,000 which would have just barely netted him $100,000 after his loan payoff and other expenses.  Keep in mind, this is the figure that he started with before they came in and did their inspection and asked for somewhere between $3,000 and as much as $10,000 in repairs.  They also advertise that these repairs are being done at wholesale prices because they do so many transactions but it seems like a lot..

    In consultation with the seller , I convinced him that I thought I could get him at least $15,000 more  net in his pocket.  He agreed and we went to work! Before I tell you what happened, lets review the math on the i-Buyer offer.  It would have netted him $100,000 minus approximately $3,000 as a minimum for repairs or $97,000 net to the seller.

    We put the home on the market, and it sold for almost full price, at $247,500 within a few weeks.  The seller had some repairs to perform which amounted to about $1000.  After it was all said and done, the seller still netted at least $20,000 more than had he taken the i-Buyer’s offer.

        Let’s analyze the rationale to NOT use an i-Buyer under the title of

6 Reasons Not to Use an i-Buyer:

1. It Will NOT Net You as Much Money The example above clearly illustrates that unless the i-Buyer company makes a mistake on pricing your home, you will not make as much money on the sale of your home versus a traditional sale methodology.

2. Pay the Cost of Moving out of Your Extra Profits. In all of their advertisements, they advertise that they will move you for free.  Sounds like a great deal but for $20,000?  I checked with many local moving companies and the average cost for a local move is less than $2,000, that is only 1/10th of the savings. Even if you moved cross-country, it probably would only be $5,000-$7,000.

3. The i-Buyer or their Representative do not Represent You That’s right, they represent the investor who is buying your house and THEIR best interest.  At the AL Gage Team we will always represent you, our client!

4. You may be Able to Negotiate not Moving Twice. It is not always possible, especially if you are doing a new build, but we can usually negotiate a longer or shorter closing or a lease back for you to stay in the home.  Even if this is not possible, again, what is the cost of putting your belongings in storage and finding a temporary place to stay.  It certainly is nowhere near $20,000.

5. They are not Providing Their Service Just to be Good Neighbors, They Must Make a Profit. The only way a company can make a profit at doing this service is to buy your home below market value.  The fees are between the same, and almost twice as much as a Realtor charges and that doesn't take into account the discounted price that they offer.

6. They Don’t Make You do Open Houses Neither do we.  They don’t make you do open houses because open houses generally don’t work to sell the house you are holding open.

Don’t sell your home to an i-Buyer and throw your equity in the trash!  Give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

The Art of (Mis) Communication

 Have you ever sent that text that got autocorrected to say something totally different than what you intended? Or sent an email without an attachment?  Or even better, dialed the wrong number by name from your contacts and started talking before you realized it was the wrong Anne that you had dialed?

     In today’s  modern methods of communication, it is very easy to miscommunicate because most of the communication is not oral.  Now I won’t go into a long diatribe about how communication has developed throughout history from cave art to Facebook Private messaging but let’s just agree that we all communicate better orally than we do by written communication for a few reasons;  The first is that in written communication, you can’t hear the tone and inflection of what is being said.  Secondly, we don’t always write what we mean and even if we do write what we mean, it can be auto-corrected in a text to mean something entirely different. 

Let me give you an example, we recently had a client text us and ask us if “we could obtain feedback from a couple of agents that had viewed their property?”  We of course always send formal requests to agents on every showing of our properties for feedback which had already been sent to these agents without reply.  Responding very quickly, we responded that “we resent the request for feedback.”  I’m sure reading this article very quickly, you got the same interpretation we did.  The client responded back “that was kind of rude.”  We re-read the text and could not figure out why they thought it was rude.

        To make a long story short, the client was correctly reading the text as we resent (as in to feel or show indignation as a result of injury or insult) for being asked to request the feedback.  Not what we intended at all.  We were trying to say that we had re-sent (meaning they were sent again) the requests.   Both the clients and us were both very upset for a few minutes until we talked on the phone.  In oral communication the difference in pronunciation between re-sent and resent quickly cleared up the confusion and we both had a great laugh about it.

     We as realtors also have to be very careful not to speak in acronyms or Realtor-speak too much.   Amongst ourselves we throw around terms like Binser, Spuds and Closing pretty easily.  We are very careful to take the time and explain to our client that the Binser, is the BINSR or the Buyer Inspection Notice and Seller Response is the list of repairs that is generally requested and agree upon by both parties at the conclusion of the inspection.  The Spuds or actually the SPDS is the Seller’s Property Disclosure Statement.  This document is a form filled out by the seller, disclose all of the defects AND work done on a property since they have owned the home. Most dispute occurring in today’s markets are either a result of a failure to disclose or improper repairs after an inspection. Both of these documents are very important in limiting the liability and exposure of both the buyer and the seller and must be prepared with care, attention to detail and expertise. 

     This again is another opportunity for a written miscommunication.  Let me give you an example.  We recently had a transaction where on the BINSR (here we go again), the buyer’s agent had asked us to “check the underlayment” under the roof tiles on the roof. We did!  Our roofing contractor said a fairly good size portion of it was bad and needed to be replaced.  Under the letter of the agreement, all my seller’s were required to do was “check it.”  I sat down with my clients and said we are only obligated to check this but the right thing to do is to repair it and if we only “check” it and they have a roof leak down the road, we likely will find ourselves in litigation.  The clients agreed with the spirit of the request albeit not the actual language and repaired the roof for a little over $1,000.  This is fine insurance against a future and expensive legal battle.

     Of course we have all had the odd mis-dial.  Last month, I scrolled through my phone and dialed Anne.  I immediately dove into the transaction at hand and after a couple minutes, Anne stopped me and said: “ Al this is Anne P., you sold our home three years ago and we moved to Iowa.  We still love that you stay in contact with us but, this is not our home!”  Embarrassed of course, I apologized and thanked her and then called the Anne Pr, that actually had their home listed with us.  Interestingly enough, they lived in the same neighborhood with the same model of home!  I had simply scrolled to Anne P in my contacts, tried to dial Anne Pr in my contacts and hit the wrong button as I was dialing.  As a person with a first name that is likely the first A in people’s contact list, I am well accustomed to being pocket dialed, only saved by those people with a friend named Aaron.

     I guess the message that I am trying to convey with this article is that we take great pride and put forth great effort to continuously communicate and service our clients.  We, of course, are human and not perfect, but our intent is always good and above board.  If you have funny examples of miscommunications via text or email, send them to me so we can use them for a future article.

 

If you want the same effort and work ethic to communicate with you throughout the sale of your home, give us a call at 623.536.8200 (I prefer to talk on the phone) but we can also communicate via email at al@algage.com

 

A Recipe for Selling Your Home!

 All the marketing classes say I should include a recipe in my marketing material so here you go!

Getting Ready: The first thing I would recommend is using non-stick utensils and pans. In the modern era of cooking it is very important that you remove or repair any of the items that might make your transaction stick to the pan. In other words, it is important to fix all of the major things wrong with your home before you put it on the market. Please note that I said all of the major things. It is fine line between the things that will prevent a home from selling and extraneous effort. We often experience seller’s going to either extreme. They either try to fix every little thing and it delays the home from the market and wastes money or they don’t fix enough and either the inspection or the condition prevent it from selling.

All of these issues can be prevented by a preview from us of the condition of the property before you start making ANY repairs.

Gather all of the ingredients: Nothing will deter a chef faster than not having an ingredient. I understand that sometimes you can substitute one ingredient for another but it often isn't the same. In the real estate business this means two things. The first is the selection of your real estate agent. Here is a brief recipe for that part of the equation:

35 years of experience.

#1 in your neighborhood 4 years in a row.

1400 homes sold in Avondale and Litchfield Park.

Dash of Humor

Huge Dollop of Patience

1 full cup of Professionalism

1 full cup of Negotiating Skill

2 full cups of Area Specialization

1 full cup of Personal Integrity

1 full cup of Honesty

 

Blend all of the above ingredients together and let them rise to the occasion. The result should be choosing Al Gage as your realtor.

 

The second step is to fold in an additional team of specialists to assist with the transactions. This includes Patty Miller from Driggs Title, Rita Marie from Finance of America and Eric Villaverde from Doubletree Home Inspections and you should have the most stellar team of professionals ready to go into the oven.

 

Select the Starting Temperature: This maybe the most important part of the transaction. At what temperature do you start at? If you start it to hot (too low of a price), you may actually burn some of your equity by not getting every last dollar out of the transaction. It is easy to see when its too hot because you have massive traffic and multiple offers in just a few days. This error usually self regulates because it gets bid up over the list price in very short order.

If you start out at too low of a temperature (priced to high) you run a very real risk that the bread will become stale before you ever put it in the oven. It is very important that the initial reaction to the price is not too high or low as either one can adversely effect the transaction.

Baking: Once you have pre-heated the oven to 350 degrees by placing the home in this newsletter, let it bake for about 3 weeks at the current temperature. You can test it with toothpicks and once you receive an acceptable offer, you can remove it from the oven for about 4-6 weeks and allow it to cool (I mean close). During this cooling period, all of the specialist will become involved to prepare the icing, ice the cake and either decorate it or simply add some sprinkles. All of these processes sound very simple but, in fact, they require years of expertise and constant attention. I have thoroughly vetted all of the people on that list and can generally also recommend contractors as needed.

Serving the Cake: Once the cake has fully cooled and all of the slices of the cake have been divided up, it is time for you to serve the remainder. It still remains your responsibility for the utility transfers, signing documents and directing where you want all of your slices of the cake to go. It is also your responsibility that we don’t have any candle fires as a result of the cake so make sure you don’t cancel your insurance too soon. 

If you need help baking your cake or finding out what you need to do to get your home ready to sell

Give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

Consumer Protections that Don't Work!

We have all heard about the latest government regulation designed to protect consumers that either doesn’t work or actually has the opposite effect! What is especially clear is there is little or no protection involved in any of these protections for the seller nor has the implications to the seller been considered at all. Let me try to outline the most egregious.

The Three-Day Closing Disclosure Waiting Period: The CFPB (Consumer Finance Protection Bureau which sounds like something from George Orwell) has instituted a three-day waiting period from the time the buyer receives and acknowledges the Closing Disclosure Statement before they can sign documents and close the transaction. This requirement is non-waivable except in extreme financial emergency. The time period is supposed to be utilized so the buyer can compare the initial loan disclosure with the final figures. Sounds like a good plan! First of all, I can do this in about 2 minutes. Second of all, the buyer probably does not know what to look for without the assistance of their agent or lender. What it actually does is either make the buyer rent a truck and pay a hotel for an extra day or three days over a weekend.

The Home Valuation Code of Conduct: This little gem was put in place as a result of the false blame (the real cause was excessive speculation on the part of buyers in real estate) placed on real estate agents and appraisers as a result of the 2008 market crash in real estate.

This program establishes Appraisal Management Companies to supervise and randomly assign appraisers. This program also prevents the agents or the lender from directly contacting the appraiser in an attempt to influence the outcome which was part of the false blame in 2008. Sounds Good?

     Well, there are several major flaws in this process. In my almost 35 years in the industry, I will start with the fact that appraisers were never very easy to influence in the first place. They are professionals but just like all of us, they occasionally make mistakes or could benefit from extra knowledge about the upgrades or improvements in the property. The VA actually has a program called Tidewater, where the appraiser has to notify and ask for information if the appraiser cannot achieve the desired sales price. We are currently permitted to supply them comparable sales if they ask for it and are allowed to provide a list of upgrades. In the good old days, when we could build a relationship with an appraiser, we could call them up and ask if a house would likely appraise, BEFORE ANYONE SPENT $650.

Speaking of the $650, this is more than double what the cost of an appraisal was before the institution of this program and is paid to the Appraisal Management Company not the actual appraiser. The appraiser essentially receives about half of that and the Appraisal Management Company receives the rest. The dirty little secret here is that many of these Appraisal Management Companies, which are supposed to be arms length from the lender, are actually owned by the lender’s they provide service to. Not exactly a model designed to protect the consumer!

The High Priced Mortgage Test: This is probably the worst offender of all. This one, among other things, prescribes that a person cannot obtain a mortgage where the costs to obtain the mortgage (including title fees) cannot exceed 5% of the mortgage amount paid by the buyer. Sounds perfect at first sight but it actually penalizes buyers who are more qualified or have more resources. All these years, you though a buyer that paid their own closing costs or put more money down was MORE likely to obtain the mortgage! WRONG!

We recently sold a home to a young couple who had saved/inherited enough money to put about 15% down AND pay their own closing costs. We absolutely stole them a home. The home was listed for $189,900 and we bid $202, 500 for the home. We were proven correct when the home actually appraised for $215,000 and the appraiser probably could have gone higher. The buyer is well qualified and ready to go when we get clarification that on initial review, they have failed the High Priced Mortgage Test and cannot obtain the loan BECAUSE THEY PUT SO MUCH DOWN AND WERE PAYING THEIR OWN CLOSING COSTS. Title fees and other fixed costs are based on the sales price not the mortgage amount. We were able to manipulate the file a bit and it closed successfully but this is not the way that it should be!

Let me give you a more illustrative example. Suppose a buyer is buying a home for $250,000 and putting $200,000 down. That leaves them a mortgage amount of $50,000 so their loan costs and title fees cannot exceed $2500. An appraisal is $600 and the title fees are $1203 leaving less than $700 for lenders fees. This will make them have to take a higher rate so they can receive a credit from the lender and does not give them the option to pay points to obtain a lower interest rate. Does any of this sound like the way informed consumers should be treated?

If you want true Consumer Protection based on the Golden Rule and old fashioned honesty, give the AL Gage Team a call at 623-536-8200 or email at al@algage.com

The Doctor is IN!

I recently had an opportunity to interview for a listing in our area. There were many of the most successful agents in our area, all interviewing for the same position. The seller selected us and as part of that conversation, they explained to one of our competitors that they were listing with us because they did not like the concept of a big team. The agent countered that proposal with a statement to the effect that when you visit the doctor’s office, the first person that you talk to is NOT the doctor! But how cool would it be if you could?

Not to be too hard on the medical profession, but lets just say that they are not known for their customer service skills as to office management. That is not to say that many doctors don’t have a good bedside manner, but I think we all agree that the waits and paperwork are simply not conducive to customer service.

 If you contact my office, you are either going to speak to the Doctor (me) or the Doctor’s Boss (my wife if you need a second opinion). We have had the huge team before and had to manage and correct the mistakes and errors of underlings and just want to be responsible for what comes out of our mouths from this point forward.

Having just done the yearly statistics for the other agents in the areas that I work just before that appointment, I was able, during the interview, to quote those statistics for my closest competitors. “Agent X, I sold 250% of their sales! Agent Y, I sold 275% of their sales.” Of course this was very powerful combined with the fact that I have been #1 in overall sales within our neighborhoods for 4 years in a row.

 Customer service is our goal combined with the actual success of selling your home. In essence, we want to diagnose the problem, treat the problem AND do it all while having a single point of contact throughout your transaction. No passing your file off to someone with minimal experience that has to continuously get back to you with the more experienced answer.

But don’t take my word for it. Listen to what our clients are saying in 2019. One of our clients said:

As we all know, selling a home can be extremely stressful. Al Gage was wonderful! He was very professional and knowledgeable in all aspects of the sale. What impressed me the most was his direct approach, none of the usual sales jargon was imposed. If your looking for a good, honest and down to earth realtor, Al Gage is your man. Also a shout out to Terri who is an absolute delight to work with.”

This review sums up everything we are trying to put forward as our philosophy in business. They characterized us as professional, knowledgeable, direct, good, honest and down to earth! You may ask how we do this? It is easy! We work efficiently and and for many long hours to service our clients.

In another review, one of our clients writes: “My house went on the MLS the next day, New Year’s Eve. I averaged one showing every day and received an offer in 6 days, higher than the list price, and closed in 3 weeks. There were 2 unexpected large repairs required before closing but Al’s accessibility by phone, text, and email, at all times, enabled the parties to resolve the matters efficiently and to everyone’s satisfaction. I would highly recommend using Al Gage.”

Again the review strikes at some of the core values of our business. Answering the phone and being prepared to offer expert advice and referrals on a moment’s notice comes with over 34 years experience. We pride ourselves in answering the phone and working efficiently. My wife and I were both blessed with great work ethic inspired by parents that had great work ethic. It does not bother us to work 12-15 hour days if need be. We would love the opportunity to work that hard for you.

 If you want to have the doctor answer the phone, diagnose the problem, treat the problem and give you a perfect prognosis on the first visit, schedule an appointment with Al to sell or buy your home.

 Al Gage

al@algage.com

623.536.8200

 

Thats a Great Question!

I got asked a great question this week by two different clients, so I thought it worthy of an explanation.  The question was two different versions of the same question.  Essentially, since I publish the price per square foot of the homes in the various neighborhoods, why couldn't they just multiply that price by the square foot of their existing home and come up with a price.  The second version was why do larger homes and/or two story homes sell for a lower price per square foot than small and single level homes. Those are both great questions but not the same questions although the answer maybe close to the same for both.

The average price per square foot is exactly that, an average.  In all of our subdivisions there are parts of the subdivisions that sell for more than other parts.  In Corte Sierra, Sage Creek and Las Palmeras, Sage Creek will typically sell for more than the other two.  Crystal Gardens will sell for more than Crystal Point or Upland Park and in Rancho Santa Fe, Alta Mira will sell for more than Vistas, Tierra or Casitas. 

There are valid reasons in all of these.  The lot size might be bigger across the board or the average house might be larger or smaller. Let’s take Rancho Santa Fe as an example.  The average lot size in Casitas is smaller than Vistas but larger than the other newer subdivisions on the West Side.  Even when they were all brand new, there was a price per square foot difference between the areas.

Over the years of working in these areas, I have developed definitive numbers to adjust between one subdivision and another and also within different parts of the subdivision.  It took me forever to determine how much to adjust between a home on the lake in Crystal Gardens versus one that was not on the lake.  Every time I try to present these to a client, they usually say something like “but I wouldn’t want to live there or on the lake.”  This is true and also the reason why you didn't purchase a home in the area or part of a subdivision or on the lake———Because it wasn't worth the difference in the price for that amenity.  Let us keep in mind that for the buyer who is looking for that amenity, it is worth the difference.  This is why you need an area expert to price your home! When I go to price a home outside the area that I work,  I have to work 10 times harder to get it right and I am much more susceptible to error because I am just not as familiar with the adjustments to make.

When you choose an agent that is not an area expert, you risk the same kind of problems. 

For the second part of the problem of why smaller homes sell for a higher price  per square foot than larger homes, it is basically a combination of economics and when you really analyze it, it becomes clear.  Let’s look at the lowest price home for sale in Rancho Santa Fe which is a 1290 S.F model.  That’s $170.5 per SF.  If you multiply that number by the largest home for sale in the same subdivision which is a Regatta (2963 S.F.) that would mean that the price of the larger one would be $505, 191 instead of the $379,000 it is listed for. To  my knowledge there has never been a sale for more than $500,000 even in the boom. If you apply the simple multiplication mode, you should all run over there and offer them about $100,000 more than they are asking.  Bottom line, it simply doesn't work that way. 

The same thing applies when it comes to a two story versus a single level.  More people prefer a single level and therefore, the single level will sell for more per square foot than a two story. 

This still doesn't explain some oddities such as what happened in Rancho Santa Fe last month.  Two identical homes with the same general features including a pool, sold for $117 and $136.5 per square foot.  Even allowing for the difference in condition, either the higher one got lucky or the lower one sold too low.  Don’t be the guy that sold their house too low because you sold to an I-Buyer, used an inexperienced agent or made a mistake in negotiations.  Call Al Gage at 623-536-8200 or email us at al@algage.com

 

Subscribe to Newsletter and Add to the Count for Free Movie Night

From 1997 to 2007 we hosted a free movie night for all of the homeowners in Rancho Santa Fe, Corte Sierra, Sage Creek, Crystal Gardens, Las Palmeras and Wigwam Creek as well as our past clients.  We would love to offer this little payback to our community again but with the price of mail and printing, the only way we can do that is with your help to promote the E-newsletter to the same level of readership as the mailings touched in the past.  In addition, we would be saving a few trees.

So here is the deal, if we can get our readership up to around 3500 per month from our current level of just over 1000, the savings in mailing and preparation cost will allow us to once again rent the entire movie theatre for our neighbors and clients. To accomplish this we will need each of you to forward the email or website to friends and have them opt in for market updates and eventually the free movie passes. We will keep a running count of the opt ins and when we reach 3,000 emails currently living in the Phoenix, Avondale, Goodyear, Litchfield Park and Buckeye areas, we will fire movie night back up

The Final Decision!

Do you remember when you were kids and you had to ask your parents for a decision.  I remember that when I would ask my mom if a friend could spend the night, she would invariably tell me to go ask my dad!  I would dutifully run to my dad (they worked together running their business) and ask!  He would always respond with “What did your mother say?”  Of course, I would respond with the obvious answer that she sent me to ask you!  He would always say “Well that’s up to her!” And the cycle would repeat!  Now I get that they may have had an ulterior motive to try to burn off some of my limitless energy, but I truly believe they were just trying to be consistent and on the same page.  Of course, there were rules about the circumstances under which you asked for this permission and if you ever violated them, the answer was automatically “NO!”  If you asked with the person you wanted to have stay over present or if it was on a school night, the answer was automatically no! If you asked too often or while they were busy talking to customers that was also the kiss of death!  If you followed all the rules and never showed your impatience with the lack of a decision, they were always very fair about granting such permissions.

     Now as I watched the Superbowl, I watched two very good quarterbacks make decisions about passing the ball!  The decisions they made all occurred in less than five seconds.  That’s not much time to think, considering any of those decisions could define their careers.

     As drivers, we make life or death decisions on a regular basis in less than a half second.  The time it takes to go from the accelerator to the brake or to change lanes. I do have faith in the ability of our society to make decisions.

     A good friend of mine was telling me about some of the Realtor commercials running in Canada right now!  They feature people who didn't use a Realtor or an inferior Realtor, and the consequences they have suffered by their poor decision.  One family ended up next to a newly built oil field and another ended up next to a biker rally every weekend.  All of these are items which a realtor is supposed to know and disclose to a potential buyer (and so is the seller). 

    Your first decision in the house buying or selling process is to choose a Realtor and obviously, we want you to choose us, but we have preached enough on that topic.  How many other decisions and decision makers are involved from that point forward? Here is a list of the people that must say yes in the home buying process in order for it to successfully close:

Seller and buyer each choose an agent.

Buyer chooses lender and pre-qualifies

Lender issues a preliminary qualification for the buyer.

Buyer chooses to view home.

Buyer decides they like a home enough to write an offer.

Seller decides to accept an offer or counter.

Buyer accepts counter offer.

Buyer chooses to perform an inspection.

Title company issues an initial title report and property appears clear to proceed.

Buyer accepts, rejects or offers the seller an opportunity to make repairs on property.

Seller accepts, rejects or agrees to repairs.

Appraisal comes in at value or price is renegotiated to appraised value.(If lower than contract price)

Buyer choose a Home Warranty Company.

Repairs are undertaken to be approved by the buyer.

Underwriter reviews loan documentation and either approves or asks for additional documentation.

Underwriter approves loan with final approval after appraisal is received.

Loan is sent to secondary buyer or quality control for last minute review.

Title company issues final title report and both parties sign.

Documents go back to lender for release of funds.

Funder releases funds after balancing with Title Company.

Loan and property closes by recording at county recorder’s office.

Buyer and seller exchange possession of property and keys!

 

That’s a lot of people that have to say “Yes!” in order for a transaction to close.  Don’t you think you want someone who has gone through this process over 3000 times to be on your side?

 

For experience and integrity, give the AL Gage team a call at 623.536.8200 or email us at al@algage.com

 

Its the Little Things

 In real estate, it’s the little things that make the difference! We are all a product of our experiences and we haven’t all experienced the same things. There are little tricks of the trade that separate the great real estate agents from the mediocre or down right bad agents. 

Let me give you a non-real estate example. Have your ever fought with a roll of aluminum foil? Pulling out too much or too little, the roll flopping out of the box, down the kitchen counter and on to the floor. How many of you knew that the end of the box has little tabs that you can punch into the end of the roll which will hold it in the box and prevent this from happening! I know I had to run and look when I first heard about this and I will pause for two minutes while those of you who have never heard of this go and look! Now that we have verified that they are there, let me give you some other examples both within and outside of real estate! 

 

One of the tricks that we have mastered is the number of pictures required to get optimum placement on many of the real estate websites. Too few or too many or redundant picture and you move down in your placement. I would love to share the number with you but then I would lose the advantage. I will just tell you that I obtained the information, on accident, from a tech from one of the biggest real estate websites.

 

How many of you have ever had your garage door opener malfunction because the eyes on the anti reverse are misaligned. Pro tip! You can override that by simply holding down the button while the door is closing. Not a long term solution but it will let you close the garage door for the night and you can fix it tomorrow!

 

Did you know that you can take the chill out of the house and use less energy in the winter time by reversing your ceiling fans? There is a little switch on most fans that will make them run in reverse, which is clockwise, which pushes all the warm air back down to where you live and off the vaulted ceilings.

 

In sales, it’s the little things. Like answering your phone and returning phone calls. Whether its another agent or a client, we try to respond to all of our calls within an hour and most of the time we actually answer the phone when you call. This may sound odd to you but you would be surprised by how many agents are “Just to Busy” to answer their phones. We sold 217% of the average of our top ten competitors in 2018 but we still find the time to answer the phone.

 

Over the years, one of the common problems we encounter on a home inspection is the dishwasher will not start after the home has sat vacant or the dishwasher hasn't been used. There is usually nothing wrong with the dishwasher. The motor is just stuck because of our hard water. If you take the lower cover off and spin that motor it will work 9 times out of 10.

 

One of the best tricks that we use isn't really even a trick. When an agent calls and says they might be writing an offer on one of our properties, we don’t give away the farm. We thank them and generally welcome their offer. We don’t gush with excitement about the fact they are writing an offer. This conveys to them non-verbally that they may have to write a little better offer to get it accepted. Selling homes is a lot like playing poker. Many, many agents give away information or tells to their fellow agents without even realizing they are doing it.

 

Every industry has these same kinds of little tricks. I remember a plumber laughing so hard, while he was apologizing to me for charging me, that it kind of hurt. I had installed my own brand new garbage disposal and was proud of my work but the dishwasher just would not drain. Who knew there was a seal in there for the disposal to be used without a dishwasher, that had to be knocked out before the drain line was attached.

 

One of our best tricks is not leaving our homes in active status trying to get back up offers. Back up offers sound good in principle, but they rarely materialize. Your days on the market continue to add up making the home prematurely stale if you should have to put it back on the market.

 

If you want an agent that barely knows the ropes or is possibly not a good poker player, then call someone you googled on line.  I have been working and been the most successful agent in your area for almost 20 years or since these homes were built. You need a savvy, honest and straightforward agent!

 

Call Al Gage at 623.536.8200 or email us at al@algage.com