News Flash! Punxsutawney Phil did not see his shadow on February 2nd during the Groundhog Day celebration at the Gobbler's Knob in Punxsutawney, Pa. This means that according to the highly scientific meteorological forecasting models employed in the tiny groundhog brain, we are in for a mild and early spring.  A welcome relief to many of our snowbird type friends and family that live in that unmerciful winter life that extends below 40 degrees Fahrenheit. I realize that by the time you receive this, his predictions may or may not have already come true.

Here is the best part of this story. NOAA the U.S. Government Weather experts tend to agree.  At least with regard to temperature.  When you get to the precipitation forecast, it models a little bit in the opposite direction for most of the country with increased precipitation as the forecast.  One of the major reasons that we live in the great State of Arizona is that you simply do not have to ever worry about that thing called winter.  As a side note, I recently attended a conference in January in Kearney, NE.  The temperature before wind chill approached –35 F.  I got to discover what frost pimples were!  Frost pimples are when you expose skin to cold and get goose bumps that then freeze.  Not fun!

In any case, you may be wondering why your local realtor is going on and on about the weather.  I assure you I am not.   I am talking about weather prediction.  Weather prediction is very similar to modeling the real estate market.  Have you ever seen the possible paths of hurricanes posted on the news?  They have a general idea of where the storm is going and when it going to hit, but this is all subject to variables and differences in the models’ mathematics.  They are fairly accurate because all of their observations are based on real time measurements and data relays.  Remember, NOAA flies through every storm taking measurements.

The real estate market and those that predict it, including me, suffer from a couple of fundamental flaws in our predictions.  The biggest of all, is that sales data is always at least 30 days lagging from the actual activity of the market.  This is because, even if the market is suddenly very hot and every home that is for sale sells this weekend, it will take at least 30 days to show in the sales market.

One of the statistics that you see used as an economic indicator in the real estate market is “new home starts.”  These statistics also suffer from the same type of lag as the above because contracts for purchase do not turn into actual starts until after at least 60 days. These starts also inflate numbers the other way by speculative starts which you may know as spec or inventory homes.  These are homes that builders construct, so that someone walking in the door can purchase a home without waiting for it to be entirely permitted and built.

Here is the current trend of New Home Starts from our good friends at Fannie Mae.

As you can see, there is a huge uptick in new home starts in the second half of 2023.  Why did this market turnaround so quickly without a significant change in the economy?  The answer is simple! Or is it?  The simple answer is interest rates have dropped significantly to around the 6% range which many people find tolerable even though over 90% of existing homeowners have rates still below that threshold.  The answer is not entirely interest rates though.  The new home builders have very aggressively incentivized the sales of their homes.

I cannot stress enough how important it is for you to take us with you before you look at new homes so that you are properly represented and have access to all the information that we have.  Let me give you an example of what I mean by aggressive incentives.  One builder is currently offering $20,000 in savings (an il defined term) and interest rates as low as 2.875% (6.32% APR) (which means it is likely a buydown or temporary rate that they are paying an obscene amount of money to obtain).  They are also offering agents 5% co-broke for bringing you in.  Want a healthy break on the sale of your existing home, make sure you take us with you.

Another home builder is offering a 2-1 buydown means that you buy the rate down 2% the first year, 1 % the second year and years 3-30 are the same or close to it as the regular going rate. They are also including $10,000 in additional closing costs with their lender for the next four months and $20,000 starting in June as well as a 4% co-broke to the agents.  I put those co-brokes in because they are attempting to incentivize you and to make the average seller realize, that when they negotiate that really low commission with an agent, they are actually hurting their chances of selling the home.

It is very difficult for the average seller to compete with these incentives on a sale so how does a seller compete?  The seller has three distinct advantages!  Most of the new builds are on the perimeter of town, a little bit longer or tougher commute and that is what makes the resale market viable. The second one, is that resale homes are usually just a little bit less expensive as compare to the new builds.  Lastly, the resale home comes with the window coverings, mature landscaping, and all the other little incidentals that come with buying a new home.

What does the resale market forecast look like?  Again, we will turn to our friends at Fannie Mae for that prediction.

If you look closely at this prediction, the prediction was a steady and long upward trend of the housing market once the interest rates were stabilized and the public became velocitized with these new higher rates.  That forecast has been improved, so to speak, to an even better forecast of a rapidly improving market.  The numbers do not quite bare that out yet but again, that is because the numbers tend to lag behind because of the delay in closing.

As predictions go, I remember laboring to get back in shore on my friends boat after a day of diving in Florida that had been undertaken as a result of a forecast of 2-3 foot waves and a slight Westerly wind of less than 10 knots.  Being on the West Coast of Florida, this would have meant that we had a following sea (easier to travel going with the wind) and a fairly smooth trip in my friends relatively large boat.  Instead we were greeted about noon with 40 knot winds from the Northeast that built the 2-3’s into 6-8’s crossing the bow at a 45 degree angle.  I am pretty sure I left a kidney on that boat.

The point of this story is that predictions are just that, predictions and can generally only show a trend.  Please to not hesitate to call if you want the latest up to date market conditions and pricing on your home. Sometimes the meteorologist don’t get it right and we believe in a groundhog?

If you want an agent has years of experience and a wealth of market predicting ability or if you want to purchase a new build and be aware of all of your options in both financing or purchase strategy, give the Al Gage Team a call at 623-536-8200 or email us at al@algage.com

 

A New Hope! Many of you don’t realize it but that was the actual title of the famous movie that was released as Star Wars in 1977.  I must admit that I was a full-on geek on the subject and stood in line for something like 7 hours to see the movie at the Cine Capri Theatre on 24th St and Camelback.  This was a luxurious theatre for the day but it only had a single screen and seated less than 500. Star Wars set the record for the longest running movie in a single theatre at this location. Luxury in those days is nothing compared to the reclining seats in one of the fine theatres we have today. 

     This is a spoiler alert for the ONE person that has been on a deserted island for the past 50 years and has not actually watched the trilogy of original Star Wars movies.  Luke Skywalker is the good guy!  The eternal optimist! The kid you want to root for from start to finish.  That same kid that you want to root for is the real estate market right now!  It is very naïve, makes a few hiccups, is very well intentioned but really has a lack of clear direction. More than anything else, he was stubborn just like this real estate market has been.

The real estate market has spit and sputtered all year.  We ended up with an overall decline in price per square foot in our neighborhoods of 9.24% for single levels and for 9.39%.  Not too bad when you consider that our market was probably a little overheated in the first place. 

Our market began to slow dramatically, almost to a standstill,  from an absolute skyrocketing market.  This was almost entirely an attempt to block inflation (the Evil Emperor).  The Emperor is nothing short of pure unadulterated negativity.  There is no long term gain from it.  If you get a 20% raise in an era with 10% inflation, you are losing money at the start of the third year.  This suddenly runaway inflation had to be stopped or the Evil Empire would surely take over.

Step in the next character who of course is Darth Vader. In this analogy, Darth Vader is the Federal Reserve Board.  The “Fed” as it is so affectionately known is the administrator of federal rates and in my opinion, largely responsible for the runaway inflation.  First, by propagating the low interest rates for so long that we became accustomed to “free” money. Secondly, by not reacting sooner to the inflation. They were trying to curb the inflation that they had denied the existence of for so long. Suddenly, they acknowledged that it was everywhere, and interest rates rose through the roof as a result.

“No Luke, I am your father!”  Much like Darth Vader in the end, the “Feds” intention was good but their implementation was disastrous.  They overreacted instead of reacting moderately after they had denied its existence for so long. The implementation of rate hikes by the “fed’ very rapidly raised common interest rates from starting with 2 or 3 as the first number to starting with an 8 or a 9 as the first number.  This was effectively the Death Star for the real estate market.  Most younger, first time buyer’s simply could not and cannot afford a $2700 a month payment for their first home.  When you eliminate the first time buyer’s every other level of sales is affected.  This effectively brought the real estate market to a halt in the middle of 2023. No one was buying and yet the real estate market did not completely crash. 

This was almost entirely luck! If you want to be lucky you have to at least invoke the spirit of the always lucky Han Solo. This slower than expected drop in prices, was  made possible by a bit of nesting behavior on the part of many home sellers.  They wanted to move but could not give up their two or three percent mortgage to jump to an 8% mortgage so they just stayed. They simply didn't take some of those promotions or lateral transfers.  Again, this was pure luck, but it kept the real estate market stable or at least in stasis although some of our homes went down as much as 15% in the last half of the year.

Everything in this world either runs on politics or supply and demand.  The solution that has evolved is a combination of both.  The interest rate market final invoked its inner Yoda and came to a solid direction.  It said: “Do or do not, there is no try!”

Interest rates have dropped down to numbers that start with a 6 and even once a 5.  This is great news for two of my buyer’s who were locked in at rates in the 8’s and got to float down to the new rate.  This has all happened as a result of what we must call the “Force”.  The “Force” is a combination of the lack of demand for those higher interest rates combined with ever present political pressure to get someone elected or reelected.  This has forced things such as gas prices and interest rates down somewhat more manageable levels.  To quote the movie and use an “old Jedi mind trick”, the supply and demand, the “fed”, and the extremely political pressure resulted in “these are not the droids you are looking for!”  For what ever reason these factors are improving, we should be grateful, as it likely will prevent another major crash.

The next steps for the market remain to be seen but here is what I expect.  For the next few months, there will be continued pressure to ease down on interest rates provided inflation does not kick back in.  As interest rates decrease, demand will increase proportionally.  This will be offset by a relatively equal amount of new seller’s that find that the lower rates allow them to move as well.  All of this should result in a relatively stable balance between the “good’ side and the “dark” side of the force.  My prediction is a very steady and stable market for the next six months but let’s not diminish the fact that the total number of sales in our neighborhoods is less than half what it was in 2019.

There are a couple things that could significantly alter the market.  First if the “fed’ drops the rates back into the 3’s (about as likely as the storm troopers learning to shoot accurately) or secondly some other environmental or world event alters the market. IF that is the case, we may simply have to destroy a second “Death Star” and start completely over with our evaluation. 

Call me the Luke Skywalker of real estate, but I am an eternal optimist on where the market is going despite the fact that we had a pretty dismal market last year. We cannot always predict the future but I certainly hope this is the direction the market goes.

IF you want an agent that truly understands your local micro market and will handle the sale of your home like a Jedi Master, give the Al Gage Team a call at 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.

 

As I was pacing a trench in our porcelain floor last night, watching the Diamondbacks in the World Series (yes I know this will be ancient history by the time you get this article), I found myself reflecting back on the life I have been blessed to live.  I have a great wife, children, parents, grandchildren, and extended family in the area.  We live in the greatest country on earth, built on free enterprise that allows people the freedom to pursue their dreams. 

As I watched the game, I drifted back to the last time the Diamondbacks were in the World Series.  Terri and I were fortunate enough to attend Game 7 of the World Series. The Diamondbacks won in dramatic, walk off fashion in the bottom of the ninth inning for the first major championship for the Valley.

I can distinctly remember that after the game was over, nobody left! They all just stood their and cheered.  Even the Yankee fans didn't leave.  You may think “Well it was one of the best World Series Games Ever!” or “Curt Schilling and Randy Johnson pitching AND a walk off win!”  All of those are perfectly accurate. But that is not why they stood and cheered for nearly 2 hours after the game was over!

You see, that game, that series, and even just the existence of baseball represented something more at that time.  It represented a return to normal!  It symbolized that America, and the American way of life would survive! Standing and cheering represented cheering for America!

For those of you that don’t remember that World Series was played shortly after 9/11.  We were all wondering what the coming war, economy and future would look like.  There was a great deal of unknown and uncertainty. 

It strikes me as somewhat similar to now.  We are on the verge of war, there is a great deal of uncertainty in the economy, and I know a great many people are struggling right now with the purpose and ability to survive financially.

But there is baseball!  And its good baseball!  Writing this article, I think about what I like about the Diamondbacks as a baseball team, This article really is about real estate and not baseball!

Fundamental Baseball

This team perhaps plays a little old school.  They play a game based on the basics.  They get on base, bunt, squeeze, steal and otherwise advance runners and then rely on the rest of the team to knock in the runs. They don’t always swing for the fences.

At our team, we also play a little old school.  Straight forward, if you will! We believe in the basics. We believe in pricing the home right (get on base), marketing the property through a system that has been proven more than 1500 times (advance the runners) and then rely on the expertise and reputation in the market to get the home closed (knock in the runs).  My team of lenders, inspectors, escrow officers, tradesman and contractors is second to none.  They will work tirelessly and vigilantly until the job is done.

They Hit for a Good Average!

The Diamondbacks have been able to hit for a good average this year.  That being said, if I sold houses at a batting average of .300 I wouldn't be long for this business.  Our proven system of marketing and pricing has produced a 100% closure rate over the last three years.  I am just trying to figure out What kind of baseball contract I could get if I batted 1.000.  Not sure but pretty sure the number would start with a B.

They Play Great Defense!

The Diamondbacks have led the league this year in defensive efficiency.  I heard one announcer applauding one of the Dbacks players because he had committed only 8 errors in the entire season.  Not bragging, but I have never had a lawsuit or complaint filed against me, my team, or one of my clients by another unhappy customer.  In the grand scheme of things, I have never had an error. If we do make a mistake, we fix it or otherwise make it right, every time!

Good Pitching!

I know we haven't had Randy Johnson and Curt Schiling this year, but the pitching has been good.  To equate that to pitching in our industry, there are so many agents that just are not cut out to be salespeople.  I have enough experience in my neighborhoods that I do not have to be that phony over-the-top sales person that is so stereotypical.  By the same token, I am also not the overcoached, scripted salesperson that will constantly use phrases such as “I am offering decision support” instead of “tell me what you want to do” and “the market is experiencing downward price pressure” instead of the “the market is headed down”.  Its not that I am unsophisticated, I am just going to talked to you in a conversational manner using the easiest language available.

They are Aggressive!

This World Series Team has striven to create chaos and constantly put pressure on the other team.  We will put pressure on the other team to do their jobs, but none of that pressure will ever fall to you. We just don’t believe in high pressure tactics with our clients,  We may say the market may take a turn for the worse because it happens to be true, not as a scare tactic.

They Play Straight Forward!

The Dbacks have played some beautiful fundamental ball, win or lose, in these playoffs.  Nothing extra fancy or reinventing the wheel. Just straightforward honest baseball. I have always believed in treating others as I would like to be treated. Just this week a buyer called and said they wanted to look at a home.  They asked if they had to bring their agent.  I was straightforward with them and explained that they should honor their relationship with their agent and to have them show them the house. Yes I probably could have stolen that client but that is just not my style!

They have fun!

If you have watched any games this year, you can see that they have fun!  We do too!  We got into this business because we like meeting and serving interesting and diverse people.  You will always be greeted with a smile on every encounter and you will be able to hear the smile if it is on a phone or zoom call.

The One Thing We Don’t Have

The one thing that the Dbacks have this year is a thing that we don’t have and actually don’t want!  We don’t have and don’t want a Rookie of the Year.  There are literally hundreds of realtors in the valley that I have mentored or trained over the years and almost all of them are successful.

Dependability and Consistency

While the Series isn’t over at this writing, they have been consistent and dependable.  Our service and professionalism is as consistent as a ballpark hotdog or 4th of July apple pie.  We do what we say and say what we do!

Play Ball!

I know many of you are not baseball fans or possibly root for another team.  The Phoenix Metro area is, after all composed almost entirely of transplants from other place and even if you are from hear, the was no baseball team here when I was young.  The analogy is still quite valid but in addition to playing old school baseball, we also provide all of the latest innovations and marketing strategies that are proven to work.

If you intend to list, sell, or buy a home, trust the largest asset in most peoples lives to the team you can trust!  Call Al Gage at 623-536-8200 or email us at al@algage.com

 

 

ll  22 of my  grandchildren are special to me (23 if you count the great grandson on the way). I tell you how many I have to motivate you to list with me out of sheer sympathy for the Christmas pajamas bill ALONE!  They are all wonderful, and each one is special.  But I do have one little granddaughter who is now 4, soon to be 5, who is just a bit extra special to me, and I don’t think that is a secret to all the rest.  She is a typical red head with a fierce independent streak, which I am sure she got from her grandmother.

Last year around this time, we really had a problem with her  when she visited, because our neighbor had a Halloween decoration of a ghost that just frightened her to death. She would mention it constantly, even when she was in our house watching videos. When she would walk to the car to go home, she would avert her eyes and cup her hands around them to avoid even the slightest peep of the ghost. Occasionally, however, she would sneak the slightest glimpse, much like Perseus looking at the reflection of Medusa in his polished shield.   She didn’t really want to face the ghost, but she needed to assure  herself that it was still there, and that it was still scary.  In her then three-year-old-voice, she referred to it as “The Scary Halloween.” It got to the point that any mention of Halloween costumes, witches, goblins or ghosts triggered a bit of a panic attack.  So you can imagine what that was like  when we took her to any kind of retail or grocery store during the season!

Now this year, having matured for just one year, she cannot wait for Halloween. She dresses up like ghosts and witches; she has six (6!) Halloween Costumes (almost all scary except every little girl has an Elsa costume), and she is absolutely excited about Halloween!

I can attribute this to a couple of different factors.  The first is she has just become accustomed to this thing called Halloween.  She knows it is not actually real, and it’s not going to hurt her.  The second is that she has overcome her fear of the unknown, which, of course, appears to be scary. Most importantly, she has figured out that it is not going to go away.

This is what needs to happen for the average homebuyer and seller out there.  The high interest rates and high prices eventually may adjust, but neither is going to happen very soon, unless the market crashes, which would be even scarier!

You may ask how we got here, to this combination of high interest rates and high prices, and that is worth some historical analysis.  When I first started selling real estate in 1985, interest rates (in order to combat inflation) were around 12.5%, which at the time looked attractive compared to the 16-18% it had been the three years before.  Interest rates of 12.5% seemed great to buyers when compared to the “Scary Halloween” that they had experienced the years before.  I can clearly remember the refinance market being on fire when interest rates dropped below 10% in 1990.  The major reason that this didn't really crash the market with those high rates was because the price of homes was very low.  It was usually under $60,000 in those days.

Those interest rates trended down for the next 40 years, naturally and  without too much pressure from the Federal Government.  Once the politicians figured out that they could win or influence elections based on the economy, they decided to try to win them by artificially manipulating the interest rates.  This led to rates in the 1990’s that were around 6.5% (which is about where they are now).

Then the housing bubble burst in 2008 which, contrary to what you may have heard, was precipitated more by speculation from buyers and bad mortgages than appraisers and agents driving up prices.  The bottom-line supply, albeit artificial, grossly exceeded demand  and so home prices were driven to historically high levels until they became unsustainable.  At this point, the market crashed, partially because the banks refused to believe that they could take a loss, and a plethora of other reasons that almost entirely do not apply to our current situation. 

The Government then felt like it had to do something to stimulate the economy. This spawned the outbreak of quantitative easing which is, in essence, manufacturing money out of thin air. This drove interest rates under 5%, and that trend continued until 2022 when rates bottomed out in the high 2 percents.

The last five years of artificially low interest rates have overstimulated the buying power and appreciation in the real estate market. This is why the current market prices are so high.  For almost five years, appreciation of home values has exceeded inflation.

This combination of high prices  along with high interest rates cannot be sustained in the long run, but is not going to change much in the short run. The interest rates are not likely to change significantly, and the housing prices, even if they do come down, often take 3-5 years to do so.

At some point, the public is going to have to adapt or overcome the “Scary Halloween” effect and become accustomed to the higher prices and higher interest rates.  America is, and always has been, a mobile country.  We move from town to town and state to state.  If everyone would simply stay in place, (that  would means no more job promotions, no more retirement homes, no more second homes, and no more moving closer to family) the housing market might head back to lower prices.  But I just don’t believe the American people can live that way long term. 

On my wish list is a slight reprieve from the feds for interest rates, perhaps back into the mid 5 percents, which is what it has been for 35 of the last 40 years.  This, combined with a slight downward price trend for a year or so, would at least soften the possible bubble, should one occur.  But sadly, my hot line to the Fed is broken, and there is no guarantee of that reprieve.

If you are considering selling your home, the sooner the better, because I cannot foresee another upward trend in the market for quite some time. Don’t let the “Scary Halloween” prevent you from making a move that is right for you!

If you want to maximize your equity with a proven professional with known integrity and professionalism, give the Al Gage Team a call at 623-536-8200 or email us at al@algage.com.

 

 

The real estate market continues to constrict itself.  With 25 year interest rate highs in the mid 8%s following historic low interest rates sometimes beginning with the number 2 for a percentage, this unique set of circumstances has resulted in many seller’s feeling “locked in” because of their current rates. Also called the the “golden handcuff effect”. This has resulted in a very low number of seller’s being willing to sell their home.  It would be very easy for me as a real estate agent with almost 40 years of experience to recall routinely selling homes with interest rates between 17 and 20 percent.  There is one very important distinction, the average sales price of those homes was around $60,000.  Now that the median price range is in the mid $400’s, the effect of these higher interest rates is much more dramatic even though that is still half the rate of the late 1980’s.

I wish that I could wave a magic wand and make those low interest rates still available . . . . But oh wait! I can, sort of!  They won’t be available on every home or as a product that you can get from any lender but reaching deep into my magic bag of tricks of the trade, here are a few ways that you can take advantage of the low interest rates that are still out there.

Very early in my career, almost all loans were assumable without qualification.  If you signed up to take over the loan, it was transferred into your name and the person who had originated the loan was no longer liable for the loan and the new party was now the owner and debtor for the home. Those days are long gone and will likely never come back.  Most of today’s agents have never even heard of such a thing.

When they did away with those types of loans, the loans remained assumable, in many cases, but you just had to qualify to assume the loan.  That is still the case for all FHA, VA, and USDA loans.  The point of this conversation is that there is a vast inventory of loans out there right now in that 2-5% interest rate range that are just ripe to be assumed.

Our industry has either forgotten how to do these or is very short sighted on this prospect as many agents don’t list the loans as assumable and the Multiple Listing Service has altogether done away with the listing of the amount of the existing mortgage which could be assumed.

To illustrate how this would work in round numbers let’s walk through an example of this process.  Envision a listing that is being offered for sale for $450,0000 that was purchased in 2019 for $325,000.  That borrower refinanced in 2022 to $420,000 to consolidate debt and has an interest rate of 3% with a monthly principal and interest payment of $1771.  If you purchased the property for $450,000 on a new FHA loan, you would have a down payment of $15,750 and closing costs around $13,500 (yes the seller may pay these costs) for a total cash outlay of $29,250.  This results in a Principal and Interest payment of $3356 and that does not include all of the FHA Mortgage Insurance Fees. In my scenario above, the buyer would simply pay the difference in the current loan amount existing on the property and the purchase price, in this case $30,000, plus closing costs of approximately $5,000 and assume the existing mortgage at 3%.  It has no additional risk to the seller once the new buyer assumes the mortgage. These sorts of properties will demand a premium and may be difficult to find and/or get the other agent to understand the beauty of this plan.

Although less attractive but far easier to find, would be the same type of assumable FHA, VA, or USDA loan with a low interest rate but a much greater cash to loan requirement.  In this scenario, let’s say the borrower had not refinanced and now only owes $320,000 on the property that they are selling for $450,000.  If you have the roughly $120,000 to put down to bridge the gap, then pay yourself the 7-10% interest on this loan as an investment and close on the home and enjoy your 3% mortgage. 

If you don’t have that kind of money, there may still be hope.  If you assume the mortgage at 3% for $320,000 and obtain a second mortgage or a seller carry back at  an interest rate of up to 10%, your blended rate is still only 4.76% and produces a blended payment of approximately $2262 far less than the $3356 from originating a new FHA loan.  According to my lender, with a FICO of 700 or above, your buyer can obtain a 2nd mortgage behind an assumed 1st mortgage up to a 95% ‘Combined-Loan-To-Value’ (CLTV) for a primary home.  Your buyer can go to 80% CLTV on a second home

It is also important to note that if you have a VA loan instead, the qualification of the buyer may relieve the original veteran of liability but may not restore their VA eligibility because that stays with the loan as long as it is in place unless the new buyer substitutes their own VA eligibility.

In preparation for this article we discovered that a huge majority of properties listed for sale were currently liste as “treat as free and clear.”  I do not think this is accurate and may actually reflect the fact that many agents either do not need this information or do not know how to implement it.  Every good Realtor upon taking a listing should always as their Seller if they are willing to ‘carry paper’.  If so, you can advertise the listing as ‘seller will carry’, or ‘owner financing available’.  Now, you have just broken open the pool of potential buyers for that listing.  There is no reason that listing should not sell for the list price within 30 days.  Why?  Because you now included in the audience for that listing is everyone who can’t qualify with a conventional lender.  Your Seller will be doing a big favor for any buyer.

Your Seller would receive a Promissory Note from their buyer for let’s say, 5 years at 7-10%.  This is way better than nearly every other secure investment out there today.

All of these scenarios are very conducive to those seller’s feeling “locked in” with low rates and high equities to take advantage of this lull in the market and get their home sold and move into and assume an equally low mortgage rate on the upsized home they desire.  This scenario works even better for those that are downsizing.  Equity is generally a percentage of the property value so when you are selling a large property and moving to a smaller property, equity allows for more properties to fit into the criteria for which you are searching.

If you are an investor, these techniques can in some instances be combined with a 1031 tax free exchange to purchase a new property without paying high interest rates or capital gains taxes.

Finding these homes takes extra work but mostly skill and perserverance by an agent because our system simply does not make them easy to find. We are more than willing to do the research for you find or exchange that home you are looking for.

If you are looking for this level of experience, detailed knowledge and straightforward advice, give the Al Gage team a call at 623-536-8200 or email us at Al@algage.com

 

I remember several years ago, taking a class on financial management as part of my professional renewal classes to maintain my license with the State of Arizona. In this class, the instructor talked about what it would look like if you had perfectly timed the stock market on the top 10 days over the last 20 years to buy and sell. The return on investment was astronomical. Something like a 20,000 percent return on your money. So if you successfully hit the top 10 days to buy stock and the top 10 days to sell the same stock of the last 20 years and had invested $1,000 that return would be $200,000 or if you had invested $20,000 that return would have been $4,000,000! Sounds pretty good to me.

Of course, then the instructor dropped the hammer on all that excitement. He explained that the random odds of picking those 20 specific days was something on the order of 500 million to one if they were chosen randomly and most private investors would actually do worse so that would make it closer to 520 million to one. Those are not great odds! When you compare it to a recent Power Ball odds for a pot of $429 million, the odds were 1:292.201,338. You may now be asking yourself what relevance does the stock market have to a my real estate?

One of the first questions that I almost invariably get asked when someone inquires about listing their home goes is usually, “Is now a good time to sell?” The answer to this solution is to make these kinds of decisions based on what your needs are rather than what you think is the right timing of the real estate market. Many of you are sitting on the sidelines right now because you have heard the market is weak, because interest rates are too high, or there are no buyers.

It may be true that there are less buyers than usual, but there are also significantly less sellers than usual, so this is an especially good time to sell. It is an even better time to sell and buy if you can transfer a large portion of your equity to a new home. But no one and I mean no one has a crystal ball.

If you bought a house in the frenzy of the 2007 runup to the 2008 crash, it appeared identical to the runup of 2020-2022 but there was no crash in 2022-2023. There was an adjustment, but that buyer’s market lasted for only one month, while the crash of 2008 lasted for almost 6 years before we got back to 2001 pricing. 

The lesson I am trying to drive home here, is that you cannot predict exactly what the real estate market is going to do. 

A quick high level view of the statistics show exactly why that is. In June of last year, there were 46 total sales across all of our subdivisions and 37 in May for a total of 83. This is in contrast to to 30 and 25 the last two months for a total of 55. This represents a 34% reduction in total sales, at which point you market trackers may conclude that this means that there is not enough demand and we are headed back to a buyer’s market. Basic supply and demand.

This rule of supply and demand however, works both ways. This month we only show a total of 26 Active listings across all the neighborhoods (some of those may actually have a contract on them and be seeking backup offers) and 6 pending sales. In normal conditions, there will be approximately twice the number of listings to the number of sales. The lack of the number of pending sales is not due to a lack or softness in the buyer market, it is because there is nothing for the buyer to choose from. The bottom line takeaway from all of this, is that the supply and demand are pretty close to equal and just a tad bit toward a seller’s market. Yes, as a seller you are still likely to have to pay some concessions in closing costs and repairs, but it is still a very stable market and a great time to sell or buy if you can. You can also take advantage of the lack of pressure to take your time making decisions about the largest asset of your life.

It is important to protect what equity that you have by choosing the right agent. As I snuggle up to my 39th year in real estate (and yes it was hard to achieve credibility with buyers and sellers at the age of 24) I can still show you concrete evidence of the FACT that I can get you more money for your home than what most other agents can get for you. There have been two sets of sales this year that illustrate this point. The first one occurred recently in one of our neighborhoods. I will change the facts slightly but the margins are the same. Two homes, similar in condition, one listed with me and another listed with another brokerage. I advised my client to list their home for more money than what the one across the street was listed for even though our house was approximately 200 square feet smaller with no significant difference in upgrades with any advantage going to the home not listed with me. We listed $15,000 higher than the larger home. When the sales price settled, we had to pay $12,000 in incentives and $1200 in repairs, but we sold for $15,000 more. We received a net of $1800 more for a home that was 200 square feet smaller. If you multiply 200 square feet times $200/s.f. that works out to be $40,000. In essences, we came out $41,800 better than the other seller plus whatever repairs that they had to do.

In another example, we had two homes that were model matches, they were twins, listed within days of each other. The only real difference between the two homes was that my home had a solar lease that had to be assumed that is usually a negative. Both homes were really nice with a lot of upgrades. The other home had started out listed for $499,000 for a few months and did one giant price drop to $425,000 which, of course, made it sell within the week. We listed our home a few days after that for $450,000 and it sold for that. I am not saying that the other seller received bad advice, but I would have approached price drops in a much more incremental way to find the true value of the home. Perhaps there were other factors at play of which we are not aware.

We may well be in for some drastic swings in the buyer and seller supply as we go forward with every increase in interest rate changing the buying power of a client seeking a loan of about 15% of their ability with every one percent increase or decrease in the interest rates. For now, the interest rates have somewhat stabilized in the mid 6’s and the buyer demand is pretty equal to the seller supply which leads to a pretty stable market.

Let’s look at what could derail the market going forward. If suddenly, the interest rates went up another 2%, that would like sideline most of the buyer’s seeking to buy with financing which is by far and away the predominant methdod. This would create an almost instant oversupply of homes for sale and put downward price pressure on the homes that are for sale. Whenever pressures like that exist, just as in the example above, seller’s tend to make a mistake and take drastic action that sometimes exceeds what is necessary.

The converse is also true. With our current, relatively small numbers as to demand, any sudden influx into the market of a large volume of homes such as what is held by many different institutional investors affects the market in two ways. It floods the market with homes for sale leading to an excess of supply and again creating that downward pricing pressure. This is somewhat mitigated by the fact that almost all of those homes that are owned by institutional investors are currently rental units. The loss of those units as rentals will also escalate the demand for homes to buy because people have to have a place to live, and the ones that can buy probably will. This escalation will not be enough to offset the flood of homes if one of the larger owners were to decide to liquidate.

A sudden and drastic reversal of the interest rates back to where we were in 2022, would also flood the market with both homebuyer’s and refinances. This would quickly promote the frenzied buyers market that we saw in 2022 and recreate the same inflationary pressures.

If you want someone that has survived and navigated through these difficult times, give the Al Gage team a call at 623.536.8200 or email us at al@alagage.com

 

One of the big fancy words that we learned in real estate school was the word “fiduciary”.  If you look it up in Webster’s, you get a definition that includes the word. I have had an aversion to such definitions since Miss Ludlow scolded me in the 4th grade at Avondale Elementary.  In searching around, I did find a definition that fits.  A fiduciary is “a person to whom property or power is entrusted for the benefit of another.”   As real estate agents, we have such a fiduciary responsibility to our clients.  A trust if you will!  It is very important to earn your trust as a client in both the legal and common meanings of the word.

     As part of this responsibility, our legal obligations as agents are outlined by the mnemonic CARLOAD.  I will talk about each briefly.

The C is for Confidentiality.  We as agents are not allowed to share the details of your situation with others, especially if they might at some point be negotiating on the other side.  Suppose an agent has a home listed for $500,000 and while out to dinner after a few drinks says that yes, its listed for $500k but they have only had one showing and will accept $450k.  Unbeknownst to them, the one realtor that had shown it is sitting at the next table and  recognizes the agent from all of their marketing materials.  They submitted an offer the next day for $445,000.  This agent has unknowingly violated their duty.

The A is for accountability and this one is very straight forward.  I have to be accountable for the funds that you entrusted me with.  This one is largely not a problem because we as agents rarely handle any funds. Most transactions are done via wire.  Protecting you from wire and other types of fraud falls in this area as well but that is an entirely different article.

The R is for  Reasonable Care and this definition has both a legal meaning and a common meaning.  The legal definition means that an agent must ensure that your rights are protected.  They do this by promoting inspections, disclosures, above-board negotiating, and caring for the clients possessions as if they belonged to the agent.  For the common meaning of the words, it is the little things.  If I get feedback that the property was horrible, stank, was dirty, “is the seller colorblind” or “I wouldn't buy that house in a million years”, which we do, it is acceptable to soften those blows a little bit  before we deliver them to the client.

The L is for my favorite duty, loyalty.  I am as loyal as a Labrador puppy.  This is one where the legal sense of the word is different from the common version.  Loyalty in this instance means that an agent must put the interest of the client ahead of their own interest, to a point.  We as agents obviously are not required to work for free and are under no obligation to negotiate for a lower fee as an obligation to a client.  Let me give you a real-world example of this concept that recently happened.  While on a listing appointment, the client brought to my attention the fact that the house across the street was larger and was recently listed for less than what I was recommending.  They wanted to sleep on the decision. They called in the interim concerned that the price was not right compared to the other listing. I again stated that I thought the other home was underpriced.  When we met, they again brought up the home across the street. At that point, there was an ethical bridge to cross.  I could accept their argument that the house was worth less, which would have meant less work for me or stick to my belief that the home was worth more.  No one would have known! Except me!  I insisted that they list at my price instead of a lower price. The home sold at the price and terms I quoted in just under a week.

The O is for Obedience.  To stick with the pet analogies, this is the opposite of what your cat does. Many would argue that I was not obedient to the client in the previous example.  If they had insisted, I would have obeyed and listed the home for less money and it likely would have been bid up to almost the same amount.  Obedience means following the direction given by the client even if it might be detrimental to the transaction.  An example of this level of obedience hearkens back to one of my very first real estate transactions.  I was working with a family friend that was incredibly wealthy and bought and sold hundreds and hundreds of properties before flipping was popular.  I was very green in real estate, and he was writing an offer for me on a piece of property in Cashion.  He said to offer them a certain amount “cash” and I protested quite a bit that there was no way they would accept such an offer.  He eventually told me to just go present it and sure enough, the offer was accepted.

Some of these have been quite fun.  The price will date this story somewhat, but I had a home listed for $159,500.  We received an offer for $100,000 which really made my seller upset.  I was not really happy either.  The seller directed me to counter at $159,499.50 which I gleefully complied with. To our surprise, they accepted the offer and proceeded to close.

     There are limits to the level of obedience that an agent must comply with. The client cannot require the agent to accept a different fee than what was originally negotiated in the listing contract. A client cannot compel the agent to do something illegal or unethical.  Sometimes, this is not as simple as it sounds.  If the client asks me a seemingly innocuous question such as “Are there children in the neighborhood?” , I am not permitted to answer that question because it is likely a fair housing violation.  To discourage any form of discrimination, I never answer questions such as “what do you know about the buyer?” or “where is the buyer from?” since it could potentially  be discriminatory.  Any overt form of discriminatory language or behavior is an automatic end to our relationship. I also discuss the details of the offers and generally get agreement before presenting the buyer’s names to the seller for the same reason.  If the buyer asks for me to present a buyer letter or other documents, I certainly will.

The second A is for Advocacy.  What this means in the real estate context is advocating for your position to the exclusion of all others.   This is as straightforward as it sounds, but there are times when this conflicts with the duty of confidentiality. Sometimes I seek permission to violate this confidentiality for a specific purpose.  If I have seven offers on the table for a home, all just a little bit over list price, I will ask permission to be able to disclose the best offer to the other bidders to try to get them to improve their position.  I never do this on an offer that is under list price but will often ask permission to tell other bidders that they are not the best offer.  Both of these examples violate the confidentiality of the client but fall under advocacy for the same client.

The D is for Disclosure which is where clients may get in trouble. There should be no surprises!  You may ask how it can be the agent’s job to disclose material about a property.  This duty is twofold: First, it is the agent’s responsibility to guide the client through full disclosure of everything that MIGHT be a material fact  which could affect the buyer’s decision to buy. Secondly, the agent is also obligated to pass along any and all information that they possess with three very specific exceptions under the stigmatized property laws.

Long practice and years of experience with these principles is what separates the good agents from the great agents. 

If you are looking for an agent that can handle and entire CARLOAD of questions and problems and still perform as the law but more importantly, the Golden Rule requires, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com.

 

I remember as a very small child the treat of being able to spend the night at my grandmother’s house.  She grew up from humble beginnings and lived in the government housing called the Garden Homes where the present day interchange of Dysart and I-10 now exists.  They called the complex Garden Homes because every home had room behind the house for a substantial garden.  My grandfather was an exceptional gardener and grew blackberries (which routinely got my cousins and I in trouble), okra, peas, beans, tomatoes, watermelons and cantaloupe and also had various high producing fruit trees.

     On the days we didn't sneak any blackberries, (actually the days we didn't get caught and blackberries leave a lot of forensic evidence when you are 5), grandma would make us skillet popcorn.  At five years old, this was the best!  A little butter and what she called “grease” in a cast iron skillet with a lid that just didn't quite fit and we were off to the races. Throw in a little popcorn, and the smell would pervade the house.  For me, because I was special, she would burn it just a little and also let me pick through all the half popped kernels at the end.  At my age, this was absolutely perfection!

This level of perfection was exactly where I was in my real estate career 35 years ago.  I was pretty good and served a lot of clients successfully but I just didn't know what I didn't know.

The next popcorn invention to come around was Jiffy Pop.  It was quite a successful innovation and probably made someone an incredible amount of money.  This was long before the era of microwaves and essentially, it was a disposable aluminum skillet with the oil and popcorn built in.  The lid was contained by an expandable foil twisted to lie flat at the beginning and eventually poufing out similar to a bouffant hairdo.

     I equate this era of popcorn to the Buyer Beware era of real estate.  If you were not very careful to protect yourself, it was very easy to either burn yourself, a sibling or the actual popcorn to an inedible or painful conclusion.  This era, which equates to my experience 30 years ago, required that an ethical and conscientious real estate agent be extremely diligent to ensure that the transaction turned out to be edible. This level of caution and perhaps even suspicion is not an unhealthy add on in todays market.  Being on the lookout for an unscrupulous agent, buyer or seller is part of our job to protect the client we represent.

     The next major innovation in popcorn was the invention of the microwave and shortly thereafter, the invention of microwave popcorn.  Microwave popcorn was pioneered by Orville Redenbacher, who happens to belong to the same fraternity that I do.  It was really very good and still is when you are in a hurry and quality isn't the only issue.  It also came with its own dangers.  If you can honestly tell me that you have never burned yourself on a bag of microwave popcorn or melted you glasses from the blast of steam coming out of a freshly popped bag, I am going to say, I am very sorry about your allergy to corn.

     While this popcorn remains very popular, I would like to pose a question.  Is it popular because it is good or because it is convenient?  While I personally believe that the move to convenience is part of what is wrong with society. This is especially true in the real estate market.  The great scourge of the current real estate market is the marketing to the public’s inherent aversion to inconvenience.  I am all for convenience.  I use Door Dash, Amazon, and curbside grocery on a regular basis.  When you pay that 4 or 5% fee for these services, it doesn't seem like much..  When you sell your home this extra 5% in fees or lost sales price because you didn't higher the neighborhood expert turns into thousands and thousands of dollars. The people offering to buy your home or guarantee a sale must buy it at a price where they can sell it and at least break even.

It wasn’t until I got be about 10 years old that I discovered the true créme de la créme of popcorn.  This would be Movie Theatre Popcorn!  Now you may be challenging my reality by questioning my first experience at movie theatre popcorn being when I was 10 years old but let me paint you a picture of what this town looked like back then.  The only two theatres within reasonable driving distance were the theatre at Christown Mall and the old Bethany West Theatre. Christown had more of a multi plex, but Bethany West was gigantic. This 21 mile trip one way was not facilitated by freeways, but there were also not a lot of stop lights or traffic. 

I distinctly remember Christown having the best popcorn ever.  It was hot, fresh from the popper, with just the right amount of salt and an unlimited supply of butter.  Unfortunately, these days, the butter has been replaced with a butter flavored canola oil.  Some of you may have a particular movie theatre that you preferred but everybody loves movie theatre popcorn.  You want to know why?

     It is made by a professional!  Yes that professional may be young and inexperienced in other areas of life but not popcorn.  This person has made more popcorn in their career than you ever will.  This person is also set up with the best tools available to make great popcorn.  They have an industrial style popcorn popper, the best popcorn you can buy, perfect popcorn salt and fabulous canola synthetic butter.  They also have a method of maintaining and delivering this popcorn fresh and hot!

At the Al Gage team, we have the ability to serve our popcorn H. O. T. This stands for  Honest, Open and Trustworthy.  We have built our entire career working in these small neighborhoods. We make a great team!  If we were not all of these things, you would have heard about it from our neighbors. I am the Salt for your popcorn and Terri is the butter.  We have the tools, the skill the experience  and the desire to do a great job for you in selling your home.

     There are many other types of popcorn out there, and while I am going to mention the types of popcorn, I will leave it to you to associate these types of popcorn with their corresponding types of agents.  Please don’t fall victim to the Cheesy Popcorn, the Greasy Popcorn, the Salt and Vinegar Popcorn (these agents know who they are), the undercooked or burnt out popcorn, but most importantly don’t fall victim to popcorn that wants to promise to buy or sell your home the “new way.”

If you want your popcorn done just perfect with the right amount of salt and butter, give the Al Gage Team a call at 623-536-8200 or email us at al@algage.com

 

In every astronaut training film ever made, there is always a scene where the trainee is tested on their ability to withstand g-forces.  This usually involves some kind of centrifuge which the candidate is placed along with some kind of contest to determine who could withstand the most g-forces without losing consciousness or unceremoniously disposing of their stomach contents.  As a small child here in Avondale, we were a bit short on this level of technology.

     Instead of this multi-million dollar apparatus, we were forced to accomplish the same level of testing on 8-year olds with a merry-go-round which I have pictured here so we are all on the same page.  These were variously called a roundabout or a playground spinner and are not to be confused with the motorized version with horse and music. 

     These were motorized by the experts (9 year olds) to the point of blurred vision and at the least, queasy stomachs.  You could be injured by catching an appendage entering or exiting the twirling machine as well as being involuntarily expelled from the same.  The true test of the bravery of an 8 year old was the ability to stand in the middle at a high rate of spin for a few minutes and then egress voluntarily from the machine without losing your lunch, skinning your knees or otherwise passing out from the spin rate.

This is exactly where many of you found yourself in the real estate market.  We started off 2022  at the absolute highest point of the playground.  It crept even higher until about March of that year and I began to have that same playground feeling that I used to get at the top of the metal slide at Avondale Elementary School. 

     For those of you that didn’t grow up here, you may not be familiar with the risks involved with a metal slide in the summer in Arizona.  It comes with all the common risks of a high slide such as falling off the ladder, wrecking at the end of the slide or being struck by another slider but with added risk.  If any portion of bare skin came into contact with any portion of the metal on the slide this resulted in instant second degree burns.  If you combined the natural heat of the slide with the friction of sliding to bare skin, I am sure those were third degree burns.  Our house market between May and December of 2022 did in fact experience 2nd and 3rd degree burns over almost all of the market.  One of the few areas excluded from this were much of the retirement communities which seem almost immune to the economy.

     Do you remember what is was like when you had made one too many trips across the monkey bars and on that final trip you could feel that blister forming in the palm of your hand? At the wrong time of the year in Arizona, that could be as soon as you touched the first wrung but either way most will understand what I am talking about.  It was that feeling of a little bit of panic meshed with a lot of pain which led to some tough decision making.

By the time we got to December of 2022/January of 2023, many of the real estate agents and also many of the sellers were exactly at this point.  Many seller’s had to sell because of job transfers or financial pressures stemming from other elements of the economy.  Likewise, many real estate agents that had prospered somewhat in the super bull market, simply had to go look for other employment or some way to supplement their income.

     I also remember playing on the early versions of a jungle gym.  Same basic risks as the monkey bars but you could also go inverted if you like.

     The real estate market is also a bit of a jungle out there right now.  I have preached incessantly about the misleading advertising campaigns out there and please don’t fall victim to any of those without at least consulting with me first.  There is a definite bottom to this market!  How do I know?  I get anywhere from 4-10 texts or emails a day asking for off market or fix and flip properties.  I am sure most of you get calls at least a few times a week asking if you want to buy or sell a property or if you are the homeowner.

     The best part about the old playground was that it gave you room to run.  There was a seemingly endless carpet of beautiful green grass to run on like the field of dreams.  Of course never barefoot because the field was riddled with goat head stickers and the average field temperature was 140 degrees.

     This is where I feel like our real estate market is right now.  We have a wide open field in front of use with potentially a few goat heads in the way but if we are careful, we should be free to run.

     In the past two weeks, I have received not one but three calls or emails questioning something that a goods or serviceme salesman has told a reader about the value of their home.  Two of them have been in regard to adding Solar to the home. In both cases the salesman stated that adding solar, in one case purchasing the unit and in the other leasing the unit, would increase the value of the home. This is true to a point, and applies to almost any upgrade that you add to your home. 

     These upgrades will increase the value of your home or at the very least the salability of the home.  The real question is by how much will they increase the value in proportion to what they cost. 

      .  The other call was in regard to the addition of some very special (based on the price) windows that they assured the homeowner would increase the value of the home.  Let me just say, to this point in my just under 38 year career, I have yet to make an adjustment on a market analysis or experienced an appraiser give any upward adjustment based on the brand name or upgrade of the windows. After this is answer to the reader, I don’t think she is purchasing the windows!

     These salesman are demonstrating what is termed “puffing” in the sales world.  It is not really the truth but it is also not an outright lie.  It is more of an exaggeration of the truth.  Believe it or not, this is also “legal” in the real estate salesman game. The definition of “puffing” is “conveying an overstated belief about some good or service to a prospective buyer with the goal of making a sale of that good or service”

     Many real estate salespeople promote themselves in a slightly “puffed” manner.  The age old “Million Dollar Producer!” or “Multi Million Dollar Producer!” is a prime example of this concept.  Any real estate agent that is not independently wealthy and want to survive in this business must do more than two million dollars a year in production if they are to survive. Keep in mind that if an agent lists and sells one home for more than $500,000 they qualify as a “Million Dollar Producer!”

     I have long advocated that I am one of the best real estate agents in the area.  I really try to not puff my accomplishments so that you, the consumer, can make an informed and educated choice when it comes to picking the real estate agent to represent you in the sale or purchase of one of the biggest assets in your life!  I do have nine years in a row of being the top selling agent in your neighborhoods if you exclude the largest institutional, single investor agents. With all my years of experience, let me share with you two events that happened just in the last month that I offer as empirical evidence of my superior service and operation that results in more money in your pocket, either as a buyer or seller, at closing.

     In the first scenario, we sold a home that admittedly needed a little work, so we priced it aggressively and conceded a little more in negotiations.  When we received the appraisal back, it came in $15,000 under the sales price.  The other agent did not have any experience in challenging an appraisal, 

     When I reviewed the appraisal, I found the appraiser was placing more emphasis on listed homes than sold homes, adjusting up to $30,000 for a pool (normal is about $12-15,000) but more importantly, they were utilizing comparable sales that were inferior to this home instead of homes that were more similar.

     Lets assume that your home was a single level with a three car garage and no pool.  It is only logical that you would compare it with another home  with similar square footage, a 3 car garage and no pool instead of a much smaller, two story home with a pool that was a less recent sale.  This is what the appraiser attempted to do.  We filed our challenge to the appraisal and got the appraisal corrected enabling the transaction to close escrow.  This is not something that an average real estate agent knows how to do or even that it is available.

     The second instance of empirical proof of the benefit of using the Al Gage Team is actually a bit of statistical luck. In preparing the sales records for this newsletter, I encountered a pair of identical sales, one of which was my own and one from another agent. These homes were twins which is pretty rare. While I have not been in the other home, they appear identical as to colors, upgrades and overall condition.   The other lister started out at $499,000 and sold 80 days later for $425,000, long after it would have been considered stale on the market.  My home was listed for $450,000 and was under contract in three days. Both homes closed within two weeks of each other.  Mine closed for $450,000 to a cash buyer netting my seller almost $25,000 more for EXACTLY the same home.  My listing had a had a solar lease which in most cases is a negative.  The only difference was my lister followed my advice closely throughout the listing and closing process.

     In one example, I saved my seller over $10,000 and in the other almost $25,000 just based on my years of experience.  As always, if you insist on listing with your brother’s ex’s cousin’s mother you have that right, but you should consider choosing experience and professionalism.

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

 

 If you remember the move “Forrest Gump” then you will totally understand this article and if you do not, you should go back and watch it just so you can join the rest of humanity!  The headline above is the declaration that was made by Tina Tamboer of the Cromford Report in so many words at the middle of January!  She actually wrote “Phoenix Buyers’ Market-Aand its gone!” and went on to show that it was the shortest buyer’s market in history.  The article goes on to say that in all but two Metro cities, the market has shifted back to equilibrium rather than either a buyer’s or a seller’s market.  If you remember in the movie Forrest says “And just like that she was gone!” referring to his love Jenny

     My own local statistics verify a sharp uptick in the market with all of my listings spiking in showings and going quickly under contract.  Some of this is due to a slight softening of FHA loan requirements including credit scores and fund sourcing as well as an improvement in interest rates over the month.  While there are no statistics to prove it, it is my belief that there is still significant unspent demand as a result of the frustration of many buyers at the peak of the market.  These buyer’s that desperately wanted a home at the peak last year are braving the higher interest rates and diminished buying power because of the resurgence of closing cost assistance and the lack of a bidding war to shop for properties.  Additionally, the current drop in pricing of somewhere between $40,000-$60,000 on average also spurs some interest.  The bottom line here is that these buyers simply could not hibernate any longer.  If this buyers market truly is over, they will look historically very good for snapping up homes at or near the bottom of this market.

     I believe we can expect this trend to continue throughout the remainder of 2023.  The return of negotiating (a lost art in the previous market) as well as seller concessions is inevitable and we are already seeing both as a common practice although some of the agents are just not very good at it.  I

     If the fed decides to repeat the 1980’s and drive interest rates into the high teens in an attempt to slow inflation, it will result in ALL OF THE BUYERS doing their best RUN FORREST RUN imitation. The economy, led by the housing market, will then crash mercilessly.  If that is the route that things go, we will be looking at 2008 all over again and nobody including the Fed wants that.  I think those steps are foreseeable and avoidable provide there is competent decision making at the Federal Reserve.

     I am not trying to lay all of this at the feet of the Federal Reserve either.  There are many economic factors that drive the remainder of the economy as well.  Shortages or disasters in any of these other factors could affect our rebound quite a bit as can simple gross inflation.  Now that we have all sort of accepted that the housing market goes UP AND DOWN, it is not as shocking as it was in 2008.

    In December, I accurately predicted this uptick in the market.  It appears to be holding but all of these statistics are based on very low numbers.  I was asked about the pricing of a home based on the statistics in the newsletter from a month where the price per square foot was at a high because there was one sale of a very small home.  Small homes invariable sell for more per square foot than very large homes.  When it is also based on low numbers of sales, the statistical significance can be way off.  In this instance, it would have led to a price of upwards of $700,000 and there is no home in our neighborhoods that will bring that price. If pricing was as simple as multiply the price per square foot by the number of square feet, you would not have much need for real estate agents to price your home.  Obviously, Zillow has also failed epically at deriving an algorithm to do such pricing and we continue to recommend that an experienced agent be your first choice option to price you home.

      This leads me to a bit of a hedge of my bets.  There is simply too much uncertainty out there to be certain whether the market is going to continue up or down.  I will return to my original thought and recommend that you do what is best for you now and quit trying to predict which way the market is going.  In other words, “ Life is like a box of chocolates and you never know what you are going to get!”

      If you are forced to relocate or simply want to move, the market is very likely to adjust in the same direction in both locations.  As and example, if you move now and the market goes down or up 10%, it is likely to be the same in both markets.  If you wait and the market moves in either direction, it is not likely to significantly affect you status or equity in either way.

 

Don’t let the market ping ponging back and forth deter you from you goals to buy or sell your home.  Call the area experts, the Al Gage Team at 623-536-8200 or email us at al@algage.com

 

If you remember the article that I wrote last month about whether the economy was going to give us a shiny blue bike or a lump of coal for the New Year, I may be starting to see an answer to that question.  Admittedly, I am an eternal optimist and will latch on to the slightest bit of good news. This apparently is not the path to be taken by the Fed in their ever present attempt to stem inflation because they continue to raise rates after every little bit of good economic news and even sometimes even when there is none.  I expect this to continue for the next few months but eventually we will reach a point of equilibrium.

     The first sign of a better New Year came actually on Christmas Day!  I was on my walk (say hi if you are walking mornings in Rancho Santa Fe) thinking a great deal about the state of the economy and the future real estate market.  It was just a little bit after daylight and the first person that I saw (there are not a lot of people walking at daylight on Christmas) was a young boy in a bright orange hoodie and what was he riding?  You guessed it! A brand new shiny blue bike just like the one that I had described in last month’s article. If this young persons parents will contact me, I will be sure to send them some goodwill movie tickets for the little dose of inspiration.  I was inspired!  I took this as a sign of good things to come but there wasn't much I could do with the inspiration until the New Year’s Statistics came out.

     My New Year’s Day was spent pouring over all of the year end statistics. The trend is pretty clear over the past few months as the market searches for a bottom.  I am well aware of my lean towards the bright side or an optimistic future for the market so I was very careful to not let that hope misinterpret the actual data.

     The market continues to trend downward albeit at slower pace of downward pricing.  How long this trend will continue is the truly important but unanswerable question.  If you are trying to sell a property at the current time, make sure that you get out ahead of that downward curve and get the property sold as quickly as possible.  To illustrate this example, let’s assume you are trying to sell you home for $500,000 and it does not sell the first month because it is really only worth $480,000.  Home prices are going down as much as 2% per month or$10,000.  After you reduce the price to $490,000, you are still the same margin over the new worth price of $470,000.  You continue to do the same amount of price reductions every month and just continue to ride the roller coaster down. The property never sells. If you had actually reduce the price to $470,000 the first month, you would have caught up with the market and it would have sold in that month most likely.

     The seller’s that are taking the time to do upgrades to their home before putting them on the market are finding that in the 2 or 3 months it takes to do these upgrades, the overall price of the home has gone down enough to almost offset the amount of upgrades that were installed. We are currently recommending that seller’s do a minimal amount of new upgrades to their home.

     As I dug through the statistics, I did find a couple of nuggets that gave me cause for hope.  As I did the calculations, I determined that I was again the number one agent in our neighborhoods for the NINTH Year in a row based on the number of different clients represented. (the agents that have one institutional investor do not count).  This is good news for us but bears no reflection on the condition of the rest of the market.  What I did find is that in our neighborhoods in 2022, there were a total of 320 transactions.  In 2021, there were 504.  A significantly lower number!  I then suspected that out of the 320 transactions in 2022, a great number of them occurred in the first 6 months of the year before the market completely changed. My suspicions were incorrect and more than half of the sales (166) occurred in the second half of 2022.  This bucks both the traditional seasonal slow periods and my expectation.  This surprised me and also bodes well for the near future.

     Additionally, single level homes showed an average appreciation of 19,73% and multi level homes had an average appreciation of 19.17%.  These numbers would have been banner numbers if they hadn’t included a huge spike followed by a matching tumble in home prices to date.

     If you look closely at the chart of the prices per square foot of all the different neighborhoods, it produces an interesting but very consistent trend line.  Every one of the December 2022 average price per square foot is lower than the average price per square foot for the year.  The good or optimistic statistic, if you will, is that despite this former fact, all of the December price per square foots were still well above the price per square foots for 2021.  The conclusion to be had from all of this is that yes, we have suffered a major correction but that correction is still not lower than the average price per square foot in 2021.  I think we will survive and thrive in 2023 and I look forward to representing you in the sale of your home! If you want monthly updates on these statistics for your neighborhood go to https://www.algage.com/SubscribetoENewsletter.html

 

If you want the same level of localized expertise from a professional that works almost exclusively in your market, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

The headline is not the choices that currently occur on a child’s Santa Wish List.  Those lists now include an X-Box, a computer, tablet, or an I-Phone 14 and I sincerely hope many families can afford those gifts this holiday.  I am sure that many will have a hard time. This is not the first time our economy has had a hard time and when I was a kid, for many families a shiney new bike was a major expenditure. The question really is what has this economy, and more specifically this housing market got in store for us in 2023. You can listen to the pundits talk about what is in store for the future but the truth is they probably do not know.  The reason that they don’t know is because the economy and therefore the housing market simply cannot make up its mind which way it wants to go!

The economy cannot decide whether it wants to be on the naughty or nice list for 2023.

     Inflation is rampant and has led at least somewhat to the inflated pricing that we saw leading up to this spring.  We all knew that price increases of $10-$20,000 per month and average sales prices at least $20,000 over list price were simply not sustainable.  Even though it was the practice in the market at the time, I never thought waiving appraisals and inspections was a good idea.  Make no mistake, it was great for my sellers but probably unwise for the buyers.  This hyper rise in prices in the real estate market was not all inflation.  There was some honest and justified appreciation in the rising prices and the shortage of inventory which is why prices remain higher than they were in mid 2021.

     The overall economy is trying to give us a lump of coal for 2023.  With inflation out pacing rises in wages, it is likely that the Fed will continue to raise interest rates to try to slow the inflation rate but this is not the correct fix for inflation.  Yes, it slows demand by making it more difficult to purchase big ticket items such as cars or homes but ultimately, it is not affecting the public uniformly. Artificially slowing  a few segments of the economy will certainly slow inflation, but it will also destroy many individual lives and careers. I choose to believe that the economy will eventually right itself despite or with the assistance of government intervention.  Maybe this is my wishful thinking, but optimism is a major part of my personality

     The bottom line is The Grinch might actually steal the holidays for many of my realtor colleagues. More specifically, we are currently in the midst of a major price correction and many agents simply do not have the financial stability or the experience to withstand such a correction.  The current housing market is not for the faint hearted as a seller, and it is very important to get ahead of the market from a pricing point of view.  This does not mean that you shouldn’t sell your home now because waiting also has consequences.

     While prices continue to drop by 1-2% per month, there are still segments of the homeowner population who SHOULD find a way to sell which likely means aggressive pricing.  By aggressive pricing, I am really only talking about walking the prices back to where they were around May of 2021.  You can look at this pricing as a lump of coal but I prefer to just ignore the wild ride from May of 2021 to March of 2022 and look at the shiny new bike as most sellers still have very significant equity in their home and are selling for a huge profit over what they paid for their home.

     You should sell your home NOW and maximize you equity (assuming the market continues to drop) if you are:

1. Retiring and no longer intend to own a home.

2. Moving to a market that is lower in average price as the potential percentage of net equity will work in your favor.

3. Moving for a job transfer that benefits you.  The loss of equity will be offset by the assumed pay raise at the new job.

4. Experiencing a financial hardship that may put your existing equity in danger of loss by foreclosure or other legal action.

5. Wanting to take advantage of the equity that you have built in your home.

     Trying to time up the market is and has always been a big mistake.  I have heard of many sellers that did not want to face the pricing reality end up in a much worse position by waiting. There is nothing in the home sales statistics that leads me to believe that this is near the end of the drop in pricing.  That being said, we have been doing this for close to 40 years and except for the big crash in 2008, these things generally do not last for more than 18 months and we should be in month 9 of that period.

     With all this being said, it is not likely that a magic flying reindeer with a red nose is likely to swoop in and bail us out. So far the economy this year, has been misbehaving like children destined for the naughty list.  I think that eventually, the Fed will realize that perhaps they have gone too far and will reverse the trend of raising interest rates to slow the economy.  I hope I am not wrong on this point.  If they reverse raising the rates, it is very likely that, with this increase in affordability, combined with the pent up demand that was never really satisfied in this price run up, the housing market will reverse itself.  This pent up demand was only dispersed because of the extremely high pricing in combination with the higher interest rates.  The prices have come down significantly and I think we soon reach a reversal tipping point in the market. As a comparison, the interest rate on the first home that I ever sold was 17.75%.

     From our family to yours, we are truly hoping that the economy will turn into a shiny blue bike instead of a lump of coal.  Happy Holidays to all our friends and neighbors and best wishes for the New Year!

For professional and down to earth real estate service, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com.

      .

The real estate market is only showing the slightest, little indication that it is bottoming out and that prices may actually stabilize.  Just to be clear, that would be the first time we have been in a stable market since 2012 or so. We have survived and  maintained extreme professionalism, fiduciary, honor and integrity thoughout all of these major upheavals and crashes of the market since 1985.  I am not saying it has been easy, but along the way I have had many professional and personal boosts along the way!

Of course, there are the traditional sources of inspiration that help to form and shape us into the individuals we are today. My dad had an intelligence and work ethic that was beyond belief.  He routinely said “that if any person can do a lot of something , I can do a little.” He would then proceed to try to tackle any building or mechanical problem and was widely know here in Avondale for that skill.

My mother was the accountant and manager of the business.  She was the boss behind the boss or at least she let my dad think he was the boss.  Their love was such that she had to be careful not to even hint that she liked something because he would work 24 hours a day to obtain it for her.

My grandmother also worked very hard her entire life and was my caregiver as a young child.  She taught me how to make donuts and essentially to keep a secret.  My parents had raised me to be so honest that when they came home and asked how my day had gone, I would confess to every minor transgression I had committed that day! Grandma taught me what happens at Grandmas stays at Grandmas.

Moving on into High School, I was an excellent student but my father wanted me to take over his business in the auto shop.  Although I learned and incredible amount of mechanical knowledge from him, this career choice simply did not interest me enough to pursue as a career.

I did have one teacher in high school that completely changed my life.  I was well on my way down the path of, shall we say, being a partier!  Grades started to slip until one special teacher intervened. This teacher was my FFA or Ag teacher.  We worked on all manner of farm equipment at the shop but I did not know much about agriculture.  He peaked my interest in the agriculture area, but very subtlety also introduced me to the leadership side of things.  Eventually, we came to a crossroads and as all good mentors do, he made me make a choice.  I wanted to run for state office in FFA and he had several criteria in order to sign off on the application.  As I read through the list, I could abide by the no drinking and no smoking part of everything, but there was one criteria about which I could not abide.

It was 1978 and he wanted me to get a haircut!  You would never know it now but I had an entirely full head of shoulder length hair at the time of which I was very proud.  One of the things he had taught me how to do (much to his chagrin) was debate.  We debated for hours and  he never once gave an inch.  No sideburns and basically a close to military style haircut.  I really wanted this position, and eventually relented. I went on the be elected State FFA President for Arizona on the 4th ballot, the second in a succession of 3 straight State Presidents from Agua Fria.  That year of servant leadership probably did more to shape me into a leader than any college or other activity. I am still involved with the FFA on both the Local, State, and National level to this day.  It holds a fond place in my heart.

During and after college, I worked a few government and law enforcement jobs while at the same time pursuing my real estate career.  My very first broker in Litchfield Park was a silver tongued devil and he would close 3-5 Litchfield Park Proper properties per month.  Doesn’t sound all that impressive now, but keep in mind, there were no lockboxes, cell phones, fed-x, fax or MLS computer.  You had to learn and know all of the inventory in the area and be an expert in a small area rather that running all over town.  This lesson taught me to become an area expert and I have. 

My next broker also taught me a valuable lesson.  This was around the time when the first few of the gimmicky discount brokers first appeared.  It sounds vaguely familiar with what you are being bombarded with now! “I sold real estate the traditional way for XX years and now I have invented an entirely new method of selling homes!”  “List with me for a brand new experience and net thousands more!”  He taught me to never let myself or my clients fall for such a gimmick!  Do they have a new system? Yes!  Is it unique? Yes!  Does it work? Yes! if you fall for the gimmick!  The gimmick is that you list with them and then they sell your home in the traditional manner, perhaps with a few investor clients.  Do they net more? Yes-more than the average realtor sells a home for but NOT more than an experienced, skilled agent sells for.  The statistics just don’t support that they net more than I would net you.  Can they advertise they net more?  Yes because they net more than the average realtor.

The next major influencer in my life was not someone I worked for at the time but a competitor that happened to be a friend of a friend.  We were on an extended camping trip and were talking about the state of the business and all that is involved with it.  I was demonstrating my technical expertise about a topic when he stopped me to teach me the best lesson I have ever learned in real estate practice.

He was one of the top producers in the entire valley at the time and he said “ Al, you can be the best realtor in the world but if you are hiding under a rock no one can find you! 

I have mailed this newsletter to our neighborhoods almost every month since that day.

I am especially thankful for the almost 2000 clients that have entrusted me the sale or purchase of their largest asset.  It warms my heart that many of them have become very dear friends.  Many of them have gone on to lead successful real estate careers.  Some have passed on and some are sending me the 3rd or even 4th generation of buyers and sellers!

I hope to be able to honorably and successfully serve this community for the rest of my life as well as continue to coach and be involved in many community activities.

I want to thank the entire community for this ability to serve and their faith in my ability!

If you would like to employ the services of an experienced, honorable and professional agent to serve you as an agent, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

My family is very excited for Halloween! With the rapid changes in the real estate market, it may take just a bit of Halloween magic to get your home sold! Our market continues to decline and almost none of the agents with less than 15 years experience know how to operate in such a ghoulish environment. Let’s talk about first the tricks and then the treats available to an agent with my level of experience.

Here are the tricksters!

1. The Vampires-I know I have tried to put a stake through their heart but don’t let investors and phony or misleading advertisers trick you into inviting them into your home. They have huge advertising budgets at every major sporting event but I have yet to see them actually spend a dime advertising any of the individual homes they have listed for sale.

2. The Zombies– These are the agents that are now wandering aimlessly trying to make the shift from an absolute seller’s market to an absolute buyer’s market in just a few months!

3. The Witches Council- Also known as the Federal Reserve. They are determined to stifle inflation by continuing to raise interest rates and they are not done yet. The best way for them to do this is by rapidly slowing the housing market which they are attempting to do too rapidly in my opinion. Make no mistake, the correction is needed but in a gentle slope not a cliff. Expect continued rate raises at regular intervals.

Don’t be Spooked by this Market! (The Tricks)

If you hire a great agent with a lot of experience, they should have been around long enough to know how to do some of these tricks!

1. Shape Shifter-With some government loans such as FHA and VA loans, the buyer may be able to assume the loan by qualifying for the existing loan and then bridging the remaining equity with either a second loan or their own cash. The advantage to this is that it preserves that existing loan at the now unavailable rate of 2,9%. Assumption is available with qualifying on all FHA loans and VA loans if the assumption is also by an eligible veteran. Assumptions are generally not available on conventional loans.

2. Intermittent Ghosting– This is how I would describe any of the lease to own, lease with the option type of operations that have always been problematic because they never successfully closed escrow. This is especially true in a volatile market. If the price fluctuates very much from the original price, the injured party may be reluctant to close. This problem has largely been resolved by the advent of a company called Home Partners of America. This company purchase the property outright for cash and then installs the lessee with the option to buy and relieves the seller of this burden.

3. Beating the Grim Reaper-While the IRS is not really that dire, there is no need to pay them if there is a legal way to avoid paying. One such way is a 1031 Tax Free Exchange. If you have investment property that is likely subject to capital gains taxes, this is one way to defer payment of these taxes until the final property is sold.

The Treats

1. The Pot of Gold-The limiting factor for almost all of the buyer’s out there right now is the cost of their monthly payments. It really doesn't matter how good of a deal you make on your home or how attractive it is, if the buyer cannot afford it. Many sellers think the solution is to simply lower the price on their home. This is not as effective of a tactic as doing either a 2-1 Buydown or a Permanent Buydown of the rate for the buyer. It both has more effective and costs less than reducing the price. An example is listed in the table below which illustrates options for the buyer that are more affordable than simply reducing the price. It may require a price reduction of better than 15% to accomplish the same payment as the buydowns.

2. Merlin the Wizard-I struggle with comparing myself with the the mystical legend but in many ways the comparison fits. I have closed over 1500 transactions just in our neighborhoods all without a single real estate complaint, lawsuit or in fact any major dispute! I have thousands of happy customers over the years.

This was accomplished by a few simple principals to live by. First, I always put the client first and operate under the Golden Rule of treating other people the way that I would like to be treated.

Second, years of experience has finely honed my Excalibur of negotiating skill and finesse. It is much easier to have happy clients with a few thousand extra dollars in their pocket as a result of the sale.

Finally, integrity and honesty are an inherent part of my soul. My conscious will not allow me to take advantage of someone or operate solely in my self interest to the detriment of another. My wife is even worse on this front and just simply likes to help people! As a team, we will always operate in the best interest of our client!

I hope you all have a Happy Halloween and if you need the same level of Hauntingly Great Service or Magical Success in the Price of Your Home, Give the Al Gage Team a call at 623-536-8200 or email us at Al@algage.com

 

One of the gravest military tactical mistakes that a commander can make on behalf of his troops is refusing to accept the situation that presents itself as reality.  This can be due to overconfidence, lack of accurate information or simply stubbornness. In a combat situation, this can have dire consequences of a life-or-death nature.  When this same situation presents itself in the real estate market, the consequences are not life and death but financially they can be very dire.

The real estate market for sellers is in a full-blown hasty retreat and many sellers are just refusing to accept it.  Hopefully not playing too much on the tactical references, a retreat conserves forces so they may come back in earnest at a different time, circumstance, or location.  This is what I believe the real estate market is doing as we speak. 

Seller’s pricing is rapidly shrinking. Many sellers, currently receiving advice from agent’s that have not ridden this roller coaster before, are failing to keep up with the down swing.  Let me give you one such example.  The percentages are real but the pricing has been changed somewhat to protect the innocent and uninformed, but it is based on several real life case studies.

The home was placed on the market in shall we say May or June when admittedly, the overall agent population, including me, really could not see the direction the market was going.  This meant that in keeping with the market trend at the time, the agent computed the value of the last sale, added 5%, and placed the home on the market for a hypothetical $600,000.  The reality at that time was that the market had surreptitiously turned the other way about 3%.  This meant that this listing started 8% or $48,000 over market which suggest a listing price of $552,000. 

Assuming the market’s reaction to this was no or little activity, the sellers did their part.  Presumably upon advice of their agent, they made price reduction over the course of the next 60 days of –2.5%, -2.9%, -6.6%, and finally-7.7%.  This resulted in prices of $585,000, $568,000, $530,500, and $489,500.  At this point the seller accepted an offer for the hypothetical of $480,000 and it closed.  I want you to understand that the numbers are changed, but the percentages are real. 

The mistake they made is not ever getting out in front of the rapidly declining market. If they had reduced the price to $550,000 in the early days, perhaps it would have sold for more as the market had not yet declined that much. This mistake may seem drastic and this particular case may be a little bit extreme but it only represents a 20% drop in the market. Many people who currently have their home for sale or are going to sell in the near future have fallen victim to the mistake of not getting ahead of the market and refusing to accept their circumstances. The latest headlines have been portraying that the market is going down at 5% per month.  I reject that to a point and believe that the total market decline to date is only about 15%.

On average in our neighborhood, the number of active listings is at better than a 3 to 1 ratio to the combination of pending listings and closed sales.  This means that at a minimum, we have a 3-month supply of homes available if no one newly listed their homes.  When I start to see sales in a neighborhood of 2 or 3 in one category and none in the other, this is at or approaching an all-time low.  This is not because there are no buyers!  It is because the vast majority of sellers and agents are failing to keep pace with current pricing.

There is good news though!  There is a bottom to this market although that bottom could continue to shift.  One of our clients found themselves unable to perform any further maintenance or repairs on their home and needed to sell it quickly.  We factored in what the projected cost to repair the home and a realistic pricing model and discounted the home by that amount plus about 5%.  We had multiple offers in just a few days and settled for a little under that.

     This also applies to some of the listings out there that are receiving offers that are lower than they had hoped.  This is no time for standing on a principle or negotiating over anything less than 1% of the home price.  The buyer has every advantage right now and sellers must accept this reality.

You may say, much the way the buyers did a year ago, I will wait for the market to change in my favor.  The buyers that took this approach are now seeing their patience rewarded.  Despite this, many are still sitting on the sidelines waiting for it to hit bottom which is simply unrealistic to try to time.  One word of caution, the sellers who said they were going to wait for the market to change in their favor in 2008 were not back to their breakeven point again until at least 2016.  The good news is if you take the spike out of this market, current prices have only retreated to at or about October 2021 pricing which is far superior to the retreat in 2008 to 1994 pricing.  This has been a huge spike in pricing from October of last year to April of this year, but it was likely never real and only a few lucky people were able to take advantage of the spike.  Don’t cry over spilled milk!

Again, only about 1 out of 9 listings goes pending in any given month based on current statistics.  At the Al Gage team, we placed under contract or closed 75% of our homes last month.

If you want an honest, up-front, no-obligation evaluation of the prospects of selling your home, future projection of the sale price of your home or to purchase a home, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

The answer to this might surprise many of you!  Yes, all of the indicators show that the market is slowing and it is! When a race car driver lifts his foot off the gas peddle, the race car does not suddenly screech to a halt and start running backwards.  Assuming no one else on the track collides with him the car will gradually slow down.  Now in this analogy, the Federal Reserve raising the interest rate another .75% is the equivalent of hard braking but again the car doesn't instantly come to a stop. So the final answer is no, the real estate market is not in a recession so to speak but I am not trying to re-define recession.

Let me address some of the “indicators” that lead me to believe the market is slowing. 

1. The fed raises and will continue to raise the interest rate to combat inflation.

2. Marketing times continue to extend.  The average is all the way up to about 30 days.

3. i-Buyers are shrinking or curtailing their buying operation and moving more into the traditional real estate model.

4. Inventory is climbing slowly and steadily.

5. Home builders that were not cooperating with agents and not offering incentives to the buyers are now offering 5% co-broke and up to $30,000 in incentives.

6. The appraisal trend has not statistically reversed itself yet but that is likely to appear in a downward trend in appraisals.

Ah! The smell of panic and fear is in the air!  Not to worry, these are all healthy movements to get our market back to normal! A normal market includes incentives to buyers, co-brokes to agents, 60-90 day marketing times WHERE YOU ACTUALLY HAVE TO DO SOME MARKETING, possible interest rate buydowns or assistance but more than anything else it requires experienced, professional and ethical agents.

I went on a listing appointment this last week and did not promise to sell the home within 3 days even though it might be the 30th set of 3 days when it is actually sold (my average marketing time is consistently better than the office with the three day name).  This particular individual had interviewed several other agents including the company above, both of the major i-buyers and one other experienced professional with a good track record in this area of town.

The one mentioned above recommended a price almost 10% below my recommended price (which had also factored in a market slowdown) and of course promised a quick sale according to the seller.  Of course they would sell it quickly, because it was under priced from the beginning.

Both of the i-buyers declined to offer a purchase amount but were more than willing to market the home in the traditional sense . . . . . . . . At the same lower price almost 10% under market.  I find it exceptionally strange that neither of the major i-buyers were willing to write an offer on the property in a declining market which is further proof that perhaps it is not the future of selling homes.  Of course, this is all as relayed by this seller.

I want to emphasize here that the comparable sales on this particular property were recent and paint a very clear picture of what the home should be priced at.

The other experienced professional real estate agent said according to the seller “essentially the same thing I did”. The seller chose our team because of my track record in the neighborhood. The home will begin marketing early in the month so you will see the opportunity for me to put my credibility where my mouth is.

Going forward the market may eventually cross over into that recession/declining market, but there is no indication whatsoever that it is going to crash like it did in 2008.  As I have stated before, that crash was mostly due to speculation and this market has mostly been driven by the demand of real buyers and sellers if you include the institutional long term rental buyers.

Should these institutional buyers suddenly decide to liquidate their assets, this flood of the market could have a disastrous effect.  This could only happen if the demand for rentals suddenly declines but with the higher interest rates and prices, the pressure on the rental market appears to still be on the upward trend.

The removal of the i-buyers from the market should only account for about 2% of the total market so this little bit of artificial demand going away shouldn't really impact the market very much. 

For now, don’t panic and plan to sell your home when it is convenient for you, knowing that at least you won’t have to have a bidding war or be homeless between moves.  We are experienced at contingencies, interest rate buydowns, pre and post possessions and all the other nuances of the trade that make an experienced agent simply better qualified and more successful in selling your home.

If you want the service of an experienced, straight forward agent that can navigate through all phases of a changing market, give the Al Gage team a call at 623-536-8200 or email us at al@algage.com

 

The market is changing, not crashing, but back to normal.  You may ask yourselves, what does that mean for me, if I am going to sell in the next few months or even in the coming two years?  It likely means that you need a REAL real estate agent.  I am not trying to say that all real estate agents are not real, but many of them have learned their entire experience in the real estate business in the recent extreme bull or seller’s real estate market.  They know how to do a post-possession agreement, waive an appraisal contingency, write an appraisal gap clause and expect to write three to five offers out of every eight homes sold!  All of these skills are appropriate when the sellers market is so strong that the seller can dictate any and all terms.  The market isn't like that any more!

Many  of these agents may not know how to price a home properly, help a buyer make a decision on only one home, convince an appraiser that they are in error or coach a seller on pricing and price reductions,. They also may not know how to determine if a home is priced correctly if it has been on the market for more than a week, write a contingency agreement or in general negotiate with buyers, sellers or other agents.  You may ask why that is and the answer is because they haven't had too!

No more ball park pricing!

As I do the monthly statistics for the individual market areas (which you should all sign up for), I constantly see listings sold for $45,000 under their asking price or $57,000 over their asking price.  In the case of the under, you may think this is great news for that seller and it is.  The market stepped in and corrected the error that the listing agent made in grossly underpricing a home.  I have had agents advocate to clients that they want to deliberately underprice the home in order to create a feeding frenzy.  This is both a really poor strategy to get the top dollar for your home and likely violates the fiduciary duty we as agents have to a seller.  This is because if there is no longer a feeding frenzy of buyer activity. The seller is still obligated to sell at that price or pay the commission to the agents. 

For the seller that hired an agent that grossly overpriced their home, the same applies, they likely took the first offer that came along and the buyer could obviously smell their desperation after getting only one showing in 25 days.  This agent also likely violated their fiduciary duty to the seller.  If they happened to also be the selling agent they may really getting themselves into a pickle by underselling the property.

For almost the past three years, agents need only price a home within about $100,000 for it to successfully sell and close.  Appraisers have been going along with the skyrocketing market and demand has led to some pretty desperate buyers.  As of today with roughly 2 active listings for every pending listing in our neighborhoods, the competition will get pretty stiff  pretty quickly..

Experience Counts!

As we move from an average level of showing from 25 per day to 2.5 per week, which by the way is about normal, it will become more and more important for seller’s to be patient with the market and their agent.  It will also be important for the agent to discuss and plan a price reduction strategy that is measured, proven, effective.  It does not behoove the seller to have price reductions that exude panic and desperation.

Strategy Matters!

In addition to pricing, it will also become important that agents have an integrated marketing strategy that goes beyond placing the home in your personal Facebook post!  Our strategy at the Al Gage Team is proven, repeatable and verified.  We have a nice mixture of print marketing such as this and online presence in both the website and most of the other Real Estate Platforms such as Zillow and Trulia.

Communication and Availability!

Communication is the key in this type of marketing.  Being vigilant about the communication between myself and either another agent or my client is one of the things that of which I take great pride.  You will always here from me by the end of the day and I wont be sitting at the bar when you do..  I laugh when I see preferences on MLS that we only take calls 8-5 M-F or please don’t call only text.  I am sorry but those agents are just in the wrong line of work.  We obviously can’t always answer the phone or text but you will here back from us the same day.  If you don’t, probably should check the local hospitals.

It will now become important that listing agents are able to defend their pricing to both other agents and also to appraisers who once the market trends down at all, have to start adjusting for that in their market comparisons.  In order to be able to challenge an appraisal or an appraiser, you have to be able to speak their language.  We have had very good results over the years in persuading an appraiser to see things from our point of view.

The bottom line is very few agents working today have any experience is a buyer/seller neutral market let alone a buyers market.  At the Al Gage Team we have ridden this everchanging roller coaster from the highest high (4 months ago) to the lowest low (fall of 2008) and you are going to need that level of experience in the coming months.

Don’t roll the dice with a family friend or relative, give the proven, reliable and consistent Al Gage Team a call at 623-536-8200 or email us at al@algage.com

 

I have been predicting a change in the market and it has finally arrived.  I am going to go through a few of the headlines that you may have read recently and give a brief explanation.  While the market is not an absolute seller’s market, it remains leaning in the seller’s favor just not on a 70% slope like it was before.

How iBuyers lost millions on Valley homes despite hot housing market prices. Zillow lost more than $100,000 on more than a dozen homes in the Valley since 2020. 12 News

Of course, they did and they were not alone.  Many of the iBuyers lost money in the hottest market we have ever seen which was also the most favorable to their business model.  Why you ask?  Several reasons!  They weren't playing with their money.  In most cases, they were playing with institutional investor money.  They were also entirely too aggressive at offering too much money for homes that fit their market profile.  Zillow has ceased to purchase homes in the valley and has admitted their algorithm was simply wrong.  Offerpad is also named in the article as losing money.  While not mentioned, I am sure that it is only a matter of time before Open Door and 72 Sold find that their business model is simply not as effective in a slower demand market. There is nothing wrong with any of these firms as a viable sale option but their aggressive behavior, at one time accounting for 12% of the market share, artificially drove the demand higher and higher making theirs and your purchases more and more difficult and inflated.

Housing Market Update: Nearly 1 in 5 sellers dropping their price.  The highest rate since October 2019-Redfin

Maybe a little clickbait but guess what?  This rate of seller’s dropping their price is NORMAL.  Yes, it indicates a change in the market.  It indicates a slowing of demand, but it also shows that agents have been conditioned for two years to price homes at $20,000 over the last sale and never disagree with a home seller about the price of a home for fear of losing the listings.  This is both indicative of a slowing market AND a tendency of agents in a tough market to overprice listings.  This too will sort itself out in the coming months.

The Housing Market Just Slid Into a Full Blown Correct-Fortune.

This article relies on the same statistic that the Redfin article used about sellers dropping their prices. In addition, it adds that interest rates are rising (although they backed up a little bit recently), inventory is growing, the market has peaked, and Henny Penny the Sky is Falling.  The market has peaked but my interpretation of the peak is that it is just the beginning of a return to a normal more balanced market.  Inventory had to rise and demand had do slow in order for that to happen so that we could return to normal.

Let me give you a few indications why I believe that the market is due to slow rather than crash.  The very next article in the same grouping of publications had the following headline.

Real Estate Desperate for More Inventory. Fox News.

This has been the case and the driving force behind our wild market for more than two years.  It has made it difficult to price homes as a listing agent and virtually impossible to represent the “best interests’ of a buyer.  For two years, a buyer has had to do whatever they could, and the seller demanded, to just attempt to purchase a home.

Balancing all of these articles, if you are that person that was holding out to sell your home to hit the peak of the market, you have missed it.  If you are the poor buyer that has written 47 offers on homes unsuccessfully over the past two years, now is your chance.

Many of these articles attempt to garner more clicks by sensationalized headlines but there is some truth in all of them.  I do think that the market is slowing and will continue to slow.  We continue to see other signs such as builders starting to cooperate with brokers again and even offering incentives for the first time in over two years.  Some of the builders were not even cooperating with brokers with buyers.  This will not be forgotten by the agent population, and we have seen this hurt builders before.  Here is the incentive that one builder is now offering: $25,000 to be used however the buyer would like. Additional $1,000 to the buyer’s broker and 2% of the base price.

This is not as good as it once was where the builders were paying up to 5% in incentive and 5% to the agents but it is a step in the right direction.

You may say all of these signs point to the fact that as a seller, we have completely missed it and we now have to wait 5 years before we can sell again.  Nothing could be further from the truth, and this is based on local knowledge of the market.  In the last 30 days, we have listed 3 homes in the Avondale market in the subdivisions that we work.  All three went under contract within 14 days.  One of those has since been place back on the market but we still expect to sell all three in under 30 days on the market.  That still tells me that it is still a seller’s market at least to a point. 

If you want your home sold in less than 30 days for the most money with the highest net and the least hassle plus without any obligation, give the Al Gage Team a call at 623-536-8200 or email us at al@algage.com! 

Maslow’s hierarchy of needs emphasizes that the most basic human need is shelter. It provides protection from the elements, and provides a place of storage and security for other basic human needs – food and clothes, and the “stuff” that all of us have.

     For many of you, the letter from the landlord raising the rent again is a very real problem. We are currently experiencing the most expensive time in our history to obtain housing-either by renting or buying! But the rent versus buy decision is still essentially the same. You may have to adjust your wish list based on budget and qualification concerns, but that math is the same whether you rent or buy!

     I was watching the news and they gave a quick line of 4 questions to determine whether you should rent or buy. Those four questions were

1. Where do you live?

2. How long will you live there?

3. What are you monthly payments?

4. Are you financially fit?

 

None of these address the question that was asked with the possible exception of the first two and even then not directly. Where you live can alter the rent or buy question base on the relative price of rent in an area versus the price of buying in the same market. Generally, one part of town varies greatly from another part of town on price, quality of life and ease of travel but there is not much disparity between the two on rent prices versus sales prices. Demand to live in a good area is universal across rent or buy situations within a location.

     The other questions about how long you intend to live there is important but misleading. Everybody intends to live in their current home for the rest of their lives when they purchase the home and indeed some make it for a very long time. Those pesky statistics say the average time in a particular home is between 3 and 7 years. With the front end of that statistic being 3 years. Unless you know you are moving to another location in less time than that, it really does not apply to the situation.   Many factors can alter this equation: changes in marital status (good or bad); changes in job status (job loss, promotion or transfer); or changes in health status (illness or even death) are just a few.

      The last two questions are solid advice questions, but they really don’t help you determine whether to rent or buy. IN MOST CASES, the financial difference in the ability to qualify to buy and the ability to qualify to rent a single-family home are very close to the same. Financial institutions will allow you to qualify for a monthly payment equivalent to 29-33% of your gross monthly income. Professional management companies require 2.5 or 3 times the gross income to qualify to rent. 

     The only real difference in the qualification is the debt-to-income ratio and credit scoring differences between the two scenarios. Credit scores and debt to income ratios are slightly more lenient for renting than buying. The nature of our question assumes that you have the ability to either rent or buy, so we wont discuss the differences any further. The real question is “SHOULD you rent or buy?”

     The answer is probably rent if you KNOW you will be transferring within 18 months, can’t qualify to buy, don’t have the required down payment and closing costs (although the entry funds to rent are not insignificant) or are really pretty unsure of you employment future.

     In almost all other cases (and even in some of those cases), you are going to be better off to buy rather than rent. The math on this equation is pretty simple as is the logic. As opposed to renting, and assuming that you do not refinance and pull equity out of your home, you are locking in the maximum monthly payment you will have to pay for you home except for increases in taxes and insurance. With rents continuing to increase year after year, this alone should be enough to solidify this decision to buy.

     If I throw out the insane appreciation, we have seen in 85392 the past year of 35% and in 85340 of 22% (I think this is wrong but this is what MLS says), and go back to historical averages of 3-5% appreciation this is how the math works. I buy a home in our neighborhood for the averages price of $450,000 in today’s prices. My monthly payment on a mortgage of $400,000 is $2436 PITI versus my current rent price of $2500. The home appreciates the minimum of 3% per year for the 3 years that I own the property. Rent also raises at an average of 3% per year. In three years, my house payment is still $2436 I owe $375,989 but my home has appreciated to $490,500 so I have gained $40,500 in appreciation and paid off $24,011 in debt making a net gain of $64,511. As opposed to my rent having now raised to $2775 and I literally have nothing to show for it except the smile on my landlord’s (likely a big corporation) face. 

     I would love to sell all of the tenants reading this a home but for you seller’s this is also good news. As long as this math equation remains the same, there is not likely to be the big, dramatic market crashes that we saw in 2008 and 2009. That does not mean to say that this market of 30% increases a year is sustainable. It has to slow to a crawl at some point and return to historical averages. I am shining up my crystal ball to have that answer for you next month.

     I would also implore you not to fall victim to the high dollar, misleading advertising that is praying on everyone’s desire for convenience and getting you a price that is MORE! More than what?

If you want to work with a team of professionals with a proven track record of getting the highest price, in the shortest time, with the least amount of hassle, give the Al Gage Team a call at 623.694.9004 or email us at al@algage.com

 

 Do you remember trying to balance the old-time scale in chemistry class? The slightest amount of extra material on one side of the scale would make it slam to the bottom on that side. Currently, the buyer’s side has a pillowcase full of feathers and the seller’s side has a pillowcase full of gold bars.  This is how the current supply and demand is distributed.

     Demand is currently at or near an all-time high.   Buyers are still frantically bidding and struggling to compete with a large host of institutional, generally cash buyers.  We recently sold a home that was in very poor shape.  In fact, it needed about $35,000 worth of work to be brought to an average condition.  Institutional investors bid the property more than $25,000 over list price, simply out pacing what the average individual buyer could envision.  Essentially, the institutional buyer bought the property at very close to what the as-repaired price would be.  Their game is, by the time they get the property ready, it will be worth $35,000 more. 

     All hope is not lost for buyers!  As interest rates rise, almost ALL buyers lose some of their buying power.  The exception to this would be cash buyers and buyers who were not buying at or near their maximum amount.  This reduces demand or at least the level of demand.

     In addition to this, the constant price increases we have witnessed over the past few years, also gradually and slowly eliminate buyer’s from the current price point.  These decreases demand as well.

     Inflation also contributes to a reduction in demand.  As other items such as groceries and gasoline skyrocket in price, this takes away from the comfort level of a well-qualified buyer spending $2500 per month for a mortgage.

     Rent prices continue to outpace wage increases and home prices. Not the subject of this article, but the Rent vs Buy analysis still very clearly shows that buying a home now instead of renting is still the best approach for a long-term investment.  Buying a home is an investment and, for most, the largest they will ever make. When the rental market recedes a little bit, this will affect demand in two ways.  It will reduce the clarity of the Rent vs. Buy scenario, thus easing demand.  It will also change the math for many of the corporate institutional buyers which is tied to long term hold and lease mathematics.

Lastly, the sheer frustration of many buyers trying over and over to purchase a home and not winning the bid.  Many of my buyers put up to 30 offers in on a home before they are successful.  Make no mistake, buying a home is an emotional decision.  Falling in and out of love with 15 different homes is emotionally difficult at best.  These things may make the buyers simply quit which decreases demand.

I know I just made it sound like the seller side of the market is up in the air on the teeter totter and the person on the other end is about to jump off. (I am sure my current back issues have at least something to do with this widespread practice when I was a child) This may or may not happen but it is certainly not what we are expecting. Demand is so high right now that it will be difficult to happen in a precipitous manner.

The tipping point is likely to come about slowly.  All of the factors I listed earlier will dissipate demand slowly over time.  The major exception to that would be if one or more of the large institutional owners of rental property should suddenly decide that it is in their best interest to divest themselves of large swathes of their portfolio. This could trigger a cascade.  Many of the other investors may join in a panic which could be disastrous for our market.

This is where inflation and some of the other items mentioned earlier immediately kick back in.  An increase in supply will quickly satisfy some of the current demand crisis.  This may make the real estate market volatile for a few weeks or even a full year.  Things like the cost of building materials and labor likely are not going to decrease and may continue to increase in spite of this turn. These factors will prevent any kind of major uptick in new construction to add to supply.

    There will likely be no sudden increase in supply of homes for sale because of the following basic analysis in the sale of  a home that just wasn't present, even three years ago.  Suppose you get offered that great opportunity in another city that requires you to move.  Before our current market conditions, most of what you had to consider had to do with the wages and benefits of the new job versus the security, wages and benefits of the old position. Included in your computation was the basic difference in cost of living and housing between the two markets. 

     In the current market, you have to factor in all of those factors plus the 6-9 months it may take you to gain acceptance of an offer on a home, the different supply of homes and/or housing in the new location and the likelihood of that being a permanent move.  As interest rates continue to rise, it will also be a factor in the relocation calculation. It is very difficult to recruit a new employee from a location where they have $3 or $400,000 worth of equity, a very low mortgage amount, mortgage rate and the comfort of established work.  They will have to overcome the normal trepidation of a move as well as a likely increase in the mortgage amount as well a 2-3 percent jump in the actual interest rate.

     The bottom line here is no one expects a crash like we saw in 2008 but almost everyone is expecting a slowing down of the market which is healthy.  Going back to 30 or 60 days to sell a home would eliminate most if not all the gimmicks of selling a home in 3 days and living there for a half a year as some are advertising.  Those operations only work in this overstimulated market.

     That being said, if you are contemplating a move, NOW IS THE TIME to cash out of your home or investment property as we are at or near the peak!

If its time to go, give the Al Gage Team a call at 623.694.9004 or email us at al@algage.com.

 

 You bought your home in 2017 for $225,000 and now you can sell it for $550,000 so it has appreciated $225,000.  End of Article? Correct?

Not exactly!  There are several other factors that come into play before you can declare that the homes have appreciated by 100% since 2017.  There are actually two types of appreciation:

· Improvement Appreciation-An action is taken by the owner of the property that increases the intrinsic value of the home.  This could include a new pool, granite counter tops, an addition (if done properly) or other upgrades.  I know I am really dating myself but my father moved our house from one location to another which greatly increased its value and no it was not a mobile home.

· Market Appreciation-This is the amount that my property and all the properties in the immediate area go up over time.  This is a measurable number but it is very important to realize that past “appreciation” is not a real predictor of future performance.

Individually, we have control over the first one (although I swear some folks just shouldn't have a Home Depot Credit Card) and little to no control over the vast array of market conditions that can affect the Market Appreciation.  These market conditions might include significant increases or decreases in demand and/or supply.  Here are a few examples of how demand and supply can affect the market.

· Major employer in the area closes an operation resulting in a mass exodus flooding the supply of home.

· Major employer moves into the area and creates a mass influx of population increasing demand to buy.

· Natural disaster destroys the community and/or the infrastructure eliminating demand in the area.

· Gold, oil, gas or some other valuable commodity is discovered in the vicinity and create a mass influx to the market which increases demand.

· Interest rate fluctuations.  Higher rates lower demand and lower rates increase demand spurring the market in that direction.

For the most part, the Greater Phoenix area is immune to either of the employer based examples based on its size but a large employer could certainly make a local impact.  I remember when Bechtel pulled out of the Palo Verde Nuclear Generating Station and every employee of Bechtel lived in the Villa de Paz neighborhood, that local market crashed overnight.

Interest rates are the most applicable unless they do find oil or gold on our area.

Some would say that the difference in home value (intrinsic value if you will) is all embodied as appreciation but we will analyze that number again after we look at our highs and lows for last year.

So if I look at the appreciation numbers from our neighborhoods for last year, I see the lowest appreciation of homes at approximately 26% in multi level homes in Corte Sierra and a high of over 54% in multi level homes in Westwind.  All of the rest of the West Valley numbers fell more or less in this range but these were the extremes.

So that solves it. Case closed! Buy real estate and enjoy a 26-54% return on your investment every year.  Not so fast! There are a couple points to keep in mind that might alter you outcome.

· This was the best year of price increases I have seen in 37 years of real estate.

· What goes up can also certainly go down.  We even have a real estate form now that discloses that the market is cyclical.

So this is great!  Everybody gets more money for their home, has a ton of equity that they can either access for other purchases or just preserve in their home.  Of course, if you are a buyer, you eventually get priced out of the market and decide to just stop looking which leads to a decrease in demand and market pressure in the opposite direction.

But what about inflation? The definition to this point for appreciation has been the difference in the number of dollars given for a property.  That is also the definition of inflation on product.  In this case, the product is your home.  It is a very complicated argument and economic problem to disentwine inflation from appreciation and I will not attempt it here.  I can bless you with some good ole’ fashioned country logic and math.

If you do a quick Google search for the inflation rate for 2021 the consensus number appears to be 7.1%.  If I use that number and subtract it from the appreciation rate for our neighborhoods in 2021 here are my results.

26%-7.1% =18.9% on the low end.

54.5%-7.1%=47.4% on the high end.

Either of those would be the highest rate of appreciation we have ever experienced.

I have no claim to being an economist and I still find it incredible the amount these homes have appreciated.  I have been saying for two years that this is not sustainable and been proven wrong.  I expect that this market will begin to slow unless inflation gets worse, but most likely will not crash.

If you want years of experience and an honest, straightforward approach instead of one of the “new” market gimmicks, give the Al Gage team a call at 623-536-8200 or email al@algage.com

 

 So imagine. if you will. that you have spent the last 6 months writing offers on 27 different homes before you were finally successful in obtaining an accepted contract on a home.  You wire your $5,000 earnest money to the title company per the instructions that they gave to you via email and you confirmed by phone.

You fight your way through the inspection.  There are some significant repairs that the seller does not completely agree to repair but being pretty handy, you can take care of those yourself.  The appraisal comes in $5,000 dollars short and you have to pay the difference because according to the contract you waived up to $10,000 in appraisal shortfall. 

The purchase price is $550,000 but combined with most of your life savings and the proceeds from the sale of another home, you can pay for the home in cash.  Seven or so days before the closing, you receive an email from the title company telling you to wire the money in early so that closing will not be delayed and this is fairly urgent to avoid a delay.  You notice a couple misspelled words but check and it is from the title company.

Your proceed to your bank and dutifully wire in the amount of $547,345 dollars as requested and are happy that closing costs and prorations are less than anticipated.  Since you are cautious, you keep a copy of the email and the receipt for the wire.  A few days later, the mobile notary arrives to sign your closing documents and provides you with wiring instruction to wire $551,286 to the title company and to call to verify the wiring instructions before you send the wire.

Suddenly you have that sinking feeling in your stomach that approaches a near death experience.  Your rush to your email and to you profound dismay find that the domain name of the email asking for the original wire is different by one letter.  All the rest of the signature line is perfect including fonts and colors.

Your frantically call your bank to try to stop the wire and report the fraud but your bank informs you that the wire was sent and received two days ago.  When your bank attempts to retrieve the payment from the other bank, they are informed the account has been closed and was likely under some kind of fictitious name.

Sadly you have likely lost your life savings and the proceeds of the sale of your home.  As you are talking to the FBI, they offer little to no prospect of recovering your funds if the perpetrator is ever caught.  You are speaking to the the FBI because Wire Fraud is a Federal Crime.

Perhaps the Title Companies or Real Estate Agent’s insurance will pay but probably not and here is why.  You voluntarily wired money to an active account.  The fact that the Title Company was impersonated by the hacker does not make either the Title Company or the agents responsible in my opinion but the courts and judges will likely decide this case. 

This entire story is fictional and does not involve any agent or title company that I know or am associated with.  Many title companies have switched to encrypted email to prevent this kind of fraud.

Could this have been prevented?  Of course.  One of the benefits of working with a smaller team such as my wife and I is that you recognize our voices on the phone and we recognize yours.  In this instance, a simple phone call to us as the agents would have caused us to call the title company (where we know their voices and phone numbers) and verify the wire request.  Even if the buyer had called the phone number on any of the US mail documents, this could have been prevented.

This may have your scratching your head just a bit.  Yes it is possible for the hacker to impersonate the Title Company, ask you to call to verify at the number listed on the email and do a live verification on the phone, all of which is fraudulent.

I know of a recent wire fraud that was not part of a real estate transaction that was even more sophisticated.  In this instance, the hacker intervened in the middle of an email string, including the prior email conversations, from the actual email address requesting payment. They diverted the wire instructions to their fraudulent bank account.  There was a little variation in the syntax of the emails but not enough to raise suspicion from four different viewers.  This particular fraud occurred among parties that infrequently send wire or ACH (Automated Clearing House) transfers so this particular hacker either had to be very patient or it was some form of an inside job.

The bottom line here is this level of fraud is not a phone call to grandma saying her grandson is in jail in Mexico and needs bail money.  These hackers are good at what they do and have now perfected actually intercepting emails in the midst of a chain. It is important in any kind of real estate or other type of  transaction that  you verify the recipient of your money. 

Three easy steps:

1. Call your agent before you wire!

2. Call the proposed recipient of the wire at an independently verified phone number before you wire.

3. Send the wire only when you and your agent are satisfied.

 

None of my clients have ever been the victim of such fraud but the sums of money involved at this point make us all attractive targets.

If you want the best protections available from an experienced agent, call the Al Gage

By diamonds, I mean relationships and by relationships, I mean both personal and professional.  I am going to take some of you down memory lane just a bit but hopefully it will also show you how much we care about our clients at the Al Gage team.

I write this with a heavy heart having just lost my first cousin that was part of the fab five growing up, my daughter’s mother in-law who we were close with, and my sister in law that was also in real estate and in that sense we came up together here in the Avondale, Goodyear market.  The memory of those relationships is tough to remember right now so I want to move on.

I can remember the smell of my grandma’s apron when I buried my face in  it after being picked on by the cousins, as plain as day.  I was quite small as child and the cousin who just passed was usually the one picking on me, although we became close as we got older.  He was the oldest and ruled the roost except for, of course, parents or grandparents or his younger sister who was my age.  The pecking order was well established by age except for the deviation from the sister who was just tougher than any of us boys. The only thing more comforting than the smell of grandma’s apron (which she almost always wore) was the smell of her peanut butter cookies. 

Grandma’s are special and of course I was sure I was her favorite (because she said so).  Grandma led a semi-impoverished life but ALWAYS exhibited a strong, almost inhuman work ethic and instilled that on her daughter, my mom, who passed at least some of it on to me.  I am pretty sure, not many of today’s generation could handle the hard labor that both of them did at the time.

Relationships with family are natural and instilled based on the family.  Relationships with clients are harder to cultivate and harder to maintain.  Most of the time people have need of a real estate agent and then don’t need them again for 4-7 years. 

Let me tell you about my oldest and one of my two favorite clients.  By oldest, she certainly is not very old but has been my client for the longest period of time.  I am going to refer to her as Patty T.  I first sold her home for her in 1994 which is almost 30 years ago.  Since then, we have done 5 total transactions together and the level of trust we have built is off the charts.  This has led to some cheerful banter between Patty, her husband Dave and myself that is just refreshing and fun and makes the transactions go smoother for all parties. I texted her for information for this article and she responded that she would be retiring later this year and be ready to sell another one soon.  I take that as a badge of honor that the client trusts me enough to disclose that information to me and knows they will not be hounded by my team from now until they are ready.

My sister in law and I were rivals on a very small scale in the early days of our real estate careers.  She worked for the biggest brokerage in town and I worked for one of the smallest.  When I say rivals, that is very tongue and cheek.  We always share info, stories, and frustrations with each other even though we were at different companies.  About 10 years into her career, she moved away with my brother’s job where she became a rock star in the  Green Valley Retirement Community real estate market south of Tucson.  Health eventually caused her to retire. This relationship, with just a little competitive edge, kept us both going for many of the first trying years in real estate.

The next client I want to talk about is also one of my oldest and favorite clients.  I was sort of down in the dumps based on all of the happenings over the holidays. She called me yesterday (January 1, 2022) from a new Texas phone number and said “Do you know who this is?”  I immediately recognized here voice although we probably haven't talked since she moved to Texas almost 5 years ago and said this is Laura P. I immediately had an ear to ear grin on my face. She said she was moving back to Arizona and could we help her find a new build.  My answer was “of course we can.”  Many of the builders are not offering any or very little compensation now for selling their new builds. We will still take this client to any of those homes, regardless of compensation, and put her in the best home for her.  I am excited to see here again but not nearly excited as my wife was to here that she was buying a home and moving back to the Phoenix area.  We have sold her and her family close to 10 different homes over the past 25 years but my wife has always been close to her because they share decorating ideas. 

Between the reduced compensation from the new home builders and the extra money spent at home for interior design, we likely will not make a profit on this transaction.  That is just how life works sometimes. This is what happens when you become a client for life of the Al Gage team.  Some of you may not desire that close of a relationship and that is fine as well.

As I look back on the anniversary of what will be the  37th year in real estate, I can remember almost all of the clients that we have represented.  Some have been a delight to represent while others have been shall we say “challenging”.  Many of my early clients have passed on and I have sold their homes for their children or grandchildren showing that some of that relationship building passed on to the family as well.

 

If you want to build a life long relationship with a realtor, we are ready, willing and able to accept your relationship.  Call the Al Gage Team at 623-536-8200 or email al@algage.com.

 

I want to share with you some of my memories of the Avondale area and also talk to you a bit about the assault on traditional real estate.  When I was a child, Avondale, Goodyear and Litchfield Park were cities in close proximity to each other and more or less one community.  They were separated significantly from Phoenix, Peoria and Glendale in those days.

My father, who passed away in 2017, would be 101 this month.  I miss him terribly but also miss his sage advice on business which he always performed in a very traditional, handshake fashion.  He rarely asked for deposits and always honored his or his employees work at the mechanic shop or in the machine shop in his later years. (he quit working at about 93)  Rare customer complaints were dealt with handily and in a straight forward manner.  He was well respected as a leader in the community and even signed the Charter for the City of Avondale.  In the auto industry, he was always skeptical of new technology such as electronic ignition and discounted parts.  Although they are accepted and highly functional now, in the beginning, they were prone to failure.  He also didn't like it because it turned a skilled mechanic into a robot that simply replaced modules and other parts instead of repairing them.  These new technologies may be successful now but this is after 30 years of vetting,

To relate that experience to what is going on in today’s real estate market, you are constantly being bombarded by high dollar marketing budgets promoting the “New and Improved” way of selling homes.  They promote themselves as giving you a quick sale in 3 or 4 days for XXXX dollars more.   They are spending a ton of money to promote their new and improved method of selling a home but very little to market the homes they are selling.  Maybe they are right!  I just want you to be a little skeptical when you listen to their advertising.  My statistics, using a traditional real estate approach, produce a better list price to sales price ratio and in a shorter time per sale.  And I can prove it! That is not the direction I want to go with this newsletter.

My traditional approach to real estate is not based on nostalgia or longing for the good ole days.  It is based on the fact that it works!  By works, I mean it gets the most money for the client in the shortest amount of time with the least amount of hassle. Remember, most i-Buyers never represent the seller of a home so they never accept this obligation. Remember the old saying, “You can have it fast, correct or cheap but you can only pick two!”  The one bad outcome there is fast and cheap excludes correct.  Our traditional method of real estate has some real pluses. 

Single Point of Contact.  You dial one phone number and either myself or my wife Terri WILL answer the phone if it is humanly possible.  There won’t be any hold times or talking to underlings that either are not authorized or incapable of giving you the advice you seek or the decision you need.  By providing the single point of contact, you can always rely that the advice given will be backed by us as agents both personally and professionally.

Years of Experience  I have almost 37 years of experience in real estate and Terri has 14 years of real estate experience, 3 years of escrow experience, and more than 40 years of customer service experience.  In that time, I have completed more than 1500 real estate transactions without a single formal complaint.  Does that mean every transaction was smooth and perfect.  Of course not!  If and when an issue arises, we address the problem in a straightforward and open way.  If it is our mistake, we will fix it.  If it is someone else’s mistake we will pursue them as far as we need to. Bottom line, we have lived almost every real estate experience possible.

Integrity. My father was a very big believer in knowing his limitations. He was such an expert mechanic that he didn't have many mechanical limitations.  His word was his bond and if he said he could fix it, nothing would stop him from keeping his word.  I have inherited this tradition and strive to live up to it every day. If I could have my way, we would go back to the old handshake method of doing business but that just is not possible any more. In today’s world of financial checks and balances, a lack of integrity is very short lived and cannot survive in today’s era of electronic reporting and social media.

Proven Track Record.  We have sold more homes in these areas of Avondale and Litchfield Park than any other agent for the past 7 years.  It may seem overly traditional to be an expert in a certain areas of homes. Clients are often shocked when they first describe their homes  and I tell them the square footage or the model name from the description.  They are also shocked, when I describe the progression of termite infestation into Rancho Santa Fe after Cortes Sierra and Sage Creek were built (and the ground treated).  It was almost perfectly timed at the expiration of the treatments of homes in Rancho Santa Fe and you could track the infestation as it moved south. Some of this information may save you from a legal action and knowing the area intimately certainly works in your favor.

Thankfulness

I want to thank all of my past clients, potential clients, loyal readers, friends and family for the almost 37 years of real estate and the more than 25 years specializing in Avondale, Goodyear and Litchfield Park.  Many of my closest friends are now real estate agents that I have trained or worked with and many still call asking for my expertise.  I am thankful to know all of them and those of you I have yet to meet.  Mostly I am thankful for the quality upbringing that made me who I am today.

If you not afraid to do things in a traditional way, give the Al Gage Team a call at 623.536.8200 or email us at al@algage.com

 

 Happy Thanksgiving!

 I have always been a fan of the original CBS TV show NCIS.  Many of you may be fans but many may not, so I will try to catch some of you up and then proceed with my article.  In the show, Jethro Gibbs is the team leader of a group of Naval Criminal Investigative Service agents that are quite good.  Gibbs is a little old school in the show and hesitates to embrace technology at times.  He also never hesitates to rely on the science and investigative leads provided by his team to solve a crime.  Like all TV dramas, they always solve the crime.  There are two other constants in the show.  There is always a new agent called a “nube” and Gibbs has a defined set of rules for investigations.  In the real estate market right now, we have quite a few of the “nubes” attempting to practice in a very tough market so I am going to take some of Gibb’s rules and transfer them to the real estate market.

1: Never let suspects stay together!  The reasons are obvious in a criminal investigation.  I am not try to say that buyer’s and sellers are suspects but we actively try to keep the two parties separate and make all communication go through the agents. The reasons for this are two-fold.  The first is you never know how fragile a transaction may be.  The slightest wrong thing being said or a little attitude perception may be all it takes to dissolve a transaction.  The agents are experienced at talking to each other and have a good read on their client’s sensitivities.  The second reason to operate in this fashion is so that there is preservation of a record of everything that was said or done in a transaction.  This eliminates the accusation that Susie Seller told Bobby Buyer erroneous information.

3: Don’t believe what you are told. Double check!  This is just good basic real estate practice and should be on every agent’s list.  It is very surprising how many agents receive and rely on information that they have not verified.  I remember a home in Upland Park that had the square footage listed on the county assessor as 1387.  Having sold many homes in that area, I recognized that this was not right on the listing appointment. After digging through 20-year-old floorplans and looking at on-line photos of more than 40 listings, we were able to verify that it was in fact 1493 square feet based on the placement of a bedroom window set.  This may not sound like much but when you figure 100 square feet times $200 per square foot, that means $20,000 net to the seller.  When the final appraiser measured the property, it measured 1493 but it would have been too late to renegotiate at that point if we had not spotted this up front.

3: Don’t be unreachable! Not a typo.  There are two rule #3’s.  This one goes without saying for a real estate agent.  The only way I am not answering your phone call is if I am on the other line with a client, on a plane, in church, in the hospital (might answer even then) or in a meeting with a client.  I see many agents that say their business hours are 8-5 and not on weekends or for the fastest response to text them.  Whichever method you prefer to communicate with me, be it morse code or heliograph for you history buffs, I will attempt to respond immediately.

8: Never take anything for granted!  This applies to buyers, sellers, escrow agents, lenders, appraisers as well as other agents.  You cannot assume that they either know how to do their job or that if they do know how, that they are doing their job.  It may be annoying for me to call and ask if you remembered to get that insurance claims history or the documentation for the termite treatment or solar transfer, but I am protecting your interest in the transaction by doing so.

10: Never get personally involved on a case!  This one I can go both ways on.  I love to become friends and get to know my clients.  We will go out of our way to be as personable and friendly as we can be.  Where this rule does apply is when agents get so emotionally involved in a transaction that is starts to affect the outcome of the transaction.  Sometimes agents do this because they are so vested with their clients that they cannot be objective or fair about things and sometimes it is out of a necessity for the transaction to close for the agents financial wellbeing.  Neither of those situations will ever apply to our team.

15: Always work as a team!  We have developed an experienced team of escrow officers, Patty Miller and C.J. Miller and a lender in Rita Marie that have proven their ability to solve almost any problem.  I don’t care whether it is a tax lien, trust question, probate issue or a low appraisal, we have been able to solve almost any problem as a team.

20: Always look Under!  In NCIS, they use this to always look under the bed or under the body or under something.  In our context, we have to always look for those red flags that might lead us to an underlying condition that may warrant attention.

23: Never mess with a Marines Terri’s coffee if you want to live.  Need I say more? I think we can all just live with the fact that working without caffeine is a miserable state of life and leave this one at that.  Terri is an integral part of the team and is well appreciated but there are boundaries.

28:  When you need help, ask.  This may seem simple but there are everchanging rules and nuances of this business that sometimes you just have to ask for help on.  In many cases, my fellow agents are asking me for assistance but sometimes I have to ask for help as well.

36: If you feel like your are being played, you probably are.  If you listen to some of these ads about selling your home to an i-buyer and they say they “received thousands more”, the question is thousands more than what?  The amount you expected because that happens on almost every listing appointment I go on these days.  Thousands more than the home was worth is the implication, but we just know that can’t be real.  Bottom line is, if you sell to an i-buyer, you will never know the true value of your home whereas if you list with our team, you will know the true value of your home and you still have the option to sell to an i-buyer.

45:Clean up your messes!  It isn't often that we make a mistake, but we pledge to make it right if we do.

51: Sometimes you are wrong!  Every time that I have been wrong in the last year, it has been that we received a higher price for the home than the comps or my projection predicted.

Gibbs rules do not all apply to real estate, but they are mostly a reflection of common sense which is sadly lacking in our world today.

For the best in service and compliance with Gibbs common sense rules listed above, please give the Al Gage Team a call at 623-536-8200 or email us at al@algage.com

 

Name that Candy

 

1.Happy Cowboy	1.Jolly Ranchers
2. Galaxy	2. Milky Way
3. Red Planet	3. Mars
4. Not laughing out loud	4. Snickers
5. Can’t hold onto anything	5. Butterfingers
6. A famous author	6. O'Henry
7. Famous New York Street	7. 5th Avenue
8. Round flotation device	8.Life Saver
9. In the present or the future	9. Now or Later
10.Dry cows	10. Milk Duds

 

 

Have a safe and Happy Halloween!

Totally Clickbait! I tricked you, this article is going to be about disclosure and miss representation and not about Halloween although it may include ghosts and certainly includes things that give me, as a licensed agent, nightmares. I also want to include that I am talking to you about standards of practice as a real estate agent. In no way am I offering legal advice, practicing law and I have never played an attorney on TV nor did I sleep at Holiday Inn Express last night.

     Very generally, a seller has the legal obligation to disclose anything and everything to the buyer that is a material fact about the property or area that may affect what the buyer is willing to pay or influence their decision to buy a property! There are a few exceptions to this that we will get into later.

     There are two parts to this that give me nightmares when working with a client. The first is it is very difficult to determine what is a material fact to a buyer that neither the seller or me, as the agent, have ever met. Just a few examples of material facts in our neighborhoods that may come into play. A property backing to the school with the children playing may seem to be a positive to most but may be a negative material fact to the night worker who has to try to sleep all day. For some the property backing to the Goodyear Farms Cemetery may be a negative but to at least one appraiser, he upgraded it to a positive by adjusting the price of the comparable sale upward, because the property backed to a “common area. The proximity to an airport or Air Force Base or a EPA Superfund site all could be items that a seller could claim were material facts that were omitted by a seller and would have altered their decision to buy or the price paid.

     Now let’s talk about conditions of the individual property.  If you have had roof rats, scorpions, snakes, bats, pigeons, gophers, feral cats, coyotes, bobcats, pterodactyls or ground sloths, you have to disclose that fact to the buyer. If it was only crickets or mastodons probably not, but it is also not going to hurt to disclose those facts.

     The part about disclosure that scares me the most is the unintentional kind. If you intentionally hide a defect that you know about in your home to try to mislead a buyer, then please don’t call me. I believe the law has a special place for these people. 

     By unintentional, I am talking about the leaky drain that leaked in 2004 in the main bath, was repaired by a licensed plumber and hasn’t given one hint of a problem in the 17 years since it was repaired. You as the seller completely forgot about and fail to disclose that this occurred.  Buyer buys the house, closes and moves in with their highly sensitive grandfather. They attempt to move one electrical outlet in that bathroom and discover a black fuzzy substance growing profusely behind the drywall. Granddad gets very sick! Are we liable for the mold because it was there? The answer is no! Are we liable for the mold because granddad is sensitive? No! We are liable for the mold and the medical costs because we failed to disclose a leak in that bath that may have led the buyer or their inspector to find the mold. The plumber who repaired the leak has long since moved to Tahiti and good luck collecting from them for the fact that they plumbed the drain open to the wall.   Of course you know, that this story had too much detail to not be a true story.

     I worry about many of my seller’s either forgetting such repairs or getting to the age where memory fades just a bit and unintentionally failing to disclose such repairs to the buyer. One way that this can be prevented is to just maintain a complete and concise list of repairs either on a spread sheet or on paper if you like.

     Now lets go to the second thing that gives me nightmares.  Seller’s relying on third party information to represent things to a buyer. If you tell me the hot water heater was replaced in 2019 and I look at the hot water heater and it is not obviously older than that, I, as the agent can rely on what you tell me and do not have an obligation to investigate further. Same thing with the buyer’s agent. If you told me 2019 and I tell the buyer’s agent 2019 and it looks like 2019, we don’t have an obligation to investigate further because the condition of the property, outside of red flags, is beyond our scope of expertise.

     I want to give you an example of a scenario where a seller could unintentionally and innocently be liable for a misrepresentation. Bob and Suzie, (names have been changed to protect the innocent) purchase a new set of solar panels in 2018 at a cost of $27,000. The salesman for the solar company represents to the Bob and Suzie that the solar system has a 20-year transferable warranty. In 2020, Bob and Suzie sell the home and proudly represent that the solar has 17 years left on the warranty and the system is working great because it is working great! In 2025, Richard and Jane find out the solar is malfunctioning and cannot be fixed requiring an entire new system. When they go to the solar company for replacement or repair, they find out the warranty does not cover replacement, only repair and the warranty is not transferable to a new owner. Of course, this disclosure is in the fine print on the website. In this case, the seller may be liable to the buyer for those repairs by unintentionally representing that the solar had a warranty. Admittedly, the seller’s also probably have a case against the solar company and that salesman for misrepresenting the warranty provision. I also think the buyer and their agent has some responsibility to investigate the stated facts surrounding a warranty so this one may end in a split decision but who wants to go through this process?

     Now to the actual ghoulish part, you are not required (but also not prevented) from disclosing that a death, homicide, or other form of violent crime occurred in the property. This is very important to some people, and I will tell you that a person leaving in an ambulance did not die in the property. A person leaving with the coroner or in a hearse did die in the property. All that being said, you do have to disclose the presence of a ghost!

If you want to be protected from such nightmares, goblins and other mysterious creatures of the real estate night, give the Al Gage Team a call at

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

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

 

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

 

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

 

1.        

 

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

 

 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

 

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

 

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

   “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

 

 

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     

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

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

 

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 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

 

 

 

 

 

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.

 

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

 

 

 

 

 

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.

 

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

 

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.

 

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

 

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 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.

 

 

 

 

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

 

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

 

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

 

 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

 

 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

 

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

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

 

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