"BUT SHORT SALES AREN'T A LONG SHOT ANYMORE…"

ARTICLE IN THE ARIZONA REPUBLIC ABOUT SHORT SALES

This morning in the Arizona republic’s article “Fast? No. A sure Thing? Not Likely But short sales aren’t a long shot anymore, real-estate agents say” discusses a few of the realities about short sales such as: they take a long time, currently the best deal for buyers, not as slow and shaky as people think and lastly the problem with buyers putting offers in on many short sales at once, then taking the first approved.

These are all good points and I am glad the Republic is getting the word out. I wish they could get the word to some of the slower banks. I believe, if we could get Short Sales approved or denied in 30 days or less that would be the last straw to the bottom of our market. The problem right now is to attract a buyer to a short sale, they must be “the best deal for buyers.” Which means they must be priced below market value to attract an offer.

WHY MUST A SHORT SALE BE PRICED AS “THE BEST DEAL?”

I had a hard time in college the first time we went into detail about the word “consideration.” Hey I am a considerate guy! But that is not what they meant. When a home seller sells a home and can convey title in a “normal” amount of time, our normal time is 30 days, then a buyer is willing to pay market value for that home. The market value is consideration, well so is the house. OK, don’t confuse things!

When the home seller cannot convey in a “normal” amount of time, let’s say due to a short sale, then the price (consideration) is affected and must be adjusted. In other words the home is sold below market value. You see the buyer is bearing burdens such as: the offer may not get accepted, usually a buyer needs to move, what if interest rates are higher by the time the bank approves the offer, what if the bank rejects and values increase say 10%(as they did from March to July in the valley) there are many others, more specific to individuals own circumstances. Why would the buyer take these risks???? Because the buyer is receiving consideration, the consideration is in the form of a price below market value. Does that make sense, please make comments?????

ARTICLE STATES “DATA DOES NOT SHOW LAST MINUTE SPIKE IN SALES.”

The Republic went on so question how the $8,000 first time home buyer tax rebate is affecting the market. I can tell you it is affecting the market greatly. We had a buyer cancel an offer on one of our short sales yesterday, fearing it would not be done in time for the tax credit.

WHY THEN ARE SALES NOT SPIKING?

This is simple. All year there has been an abundance of REO/Bank Owned/Foreclosure listings on the market. Buyers are attracted to them because they price as close to market value as possible. No emotions in pricing, just what was the last sale! Every time an REO/Bank Owned/Foreclosure listings comes on the market, it sells right away. There is a shortage of them. I have seen upwards to 20 offers on a listing. Currently there is a shortage of homes priced at today’s market value. That is why sales have dropped off. Due to the new HVCC appraisal rules that just came into affect, valuation increases are very difficult.

WHAT IS HAPPENING IN THE MARKET?

Buyers are buying and sellers are selling. Since August 1st, 2009, 10,894 single family residences closed escrow at an average price of $179,121, selling for an average of $81.82 per square foot.

Here is the disconnect…There are 24,003 SFR currently listed for sale right now. Their average asking price is $464,977 which represents $146.97 per square foot. Remember these are valley wide averages. There could be a home listed for $464,977 and $146.97 per square foot and it is actually at market value. But on average the SFR listing prices should be much closer to the SFR sold prices.

WHAT DOES THIS MEAN?

There are many explanations and we can’t explore them all, but let’s look at a few possibilities in my experiences:

• Too many high end homes available for sale, dragging the price of listings up
• Difficult to get financing for $1mm+ home sales, thus less than normal sales in the high end market
• Too few low end/entry level home available for sale
• Too many over priced homes listed for sale, sitting on the market
• And, most sales are first time home buyers or investors at the entry level areas, thus dragging the average sales price down

Well, we can probably take most of the other scenarios out there and work them back to the 5 above.

CLOSING

The $8,000 tax credit for first time home buyers is working. Home sales are off the charts. I believe we should extend it into next year. Maybe even make it good for everyone. You see the more we strengthen the real estate market, every home owner gets value through property value increases.

Just my Opinion…Jeff Cameron