The Phoenix Area Foreclosure Experts

Trending Metro Phoenix foreclosures -- an 18 month perspective

Metro Phoenix foreclosures continue to dominate the sales statistics in the Phoenix area real estate market. The link below contains an 18 month history of some of the more well-known cities in the Phoenix area real estate market.

The link profiles the cities of Ahwatukee, Chandler, Gilbert, Glendale, Town of Maricopa, Mesa, Phoenix, Queen Creek, Scottsdale, and Tempe. Glendale leads the way with 86.6% of all sales being Metro Phoenix foreclosures. Phoenix follows with 83.5%, and the town of Maricopa fills out the top three with 82.2%.

Click here.

Competition for Phoenix foreclosures heats up in the Phoenix area real estate market

Metro Phoenix foreclosures priced in the $70,000-$150,000 price range are flying off the shelf. I wrote about this phenomenon three times over the last 16 months, but the bidding activity today is much greater for Phoenix foreclosures than it was in these previous posts:

• January 29, 2008
• March 13, 2008
• January 10, 2009

Here are a few examples I've personally experienced while showing  Metro Phoenix foreclosures to clients over the last several weeks:

• one client had a list of 16 homes to see -- eight of the homes had received two or more offers and were accepting "highest and best offers"
• another client had a list of 10 homes to see -- 8 of those homes had received at least one offer and two had received over 10 offers; some of them were accepting " highest and best offers" and two were not accepting "any" more offers
• a third client had a list of eight homes to see -- four of them were already under contract and where accepting "back-up offers"

You definitely have to be quick in this market to pick up the lowest priced Phoenix foreclosure deals.  However, even if you are quick -- you may be asked to give your highest and best offer.

Phoenix area real estate -- a detailed look at 10 cities

I do a monthly report for Realty Times that covers the market conditions for 10 major cities in the Phoenix area real estate market. It contains some very detailed information that shows trends over the last two years.

Click here to access that detailed report.

Can you get an advance on your FHA $8,000 tax credit for 2009?

by Craig
The latest buzz is that the first time homebuyer tax credit can maybe now be accessed in advance of you filing your taxes rather than wait till after you buy the home and then filing your taxes for the credit.  Sort of like getting an advance from your employer on your next paycheck.

So what happened was a letter was published that went to every lender in the country and was put on the HUD website for public viewing saying YES WE WILL ALLOW THIS (advance) ON YOUR FUTURE TAX CREDIT. This is the equivalent of the government saying we are going to MARS -- but we have not built the rocket yet to get us there.

Here was the exact wording that started the stir…

 “We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to "monetize" the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly.”

Real estate short sales -- beware of the "non-purchase money" second mortgage

Real estate short sales can provide some great deals if you can wait out the 3-5 month process. They are becoming more common in today's market and harder to ignore (as many agents have chosen to do). Why would agents choose to ignore real estate short sales? It's because they are more complicated, take much longer to close escrow, and their outcomes can be uncertain.

To begin May 2009, metro Phoenix foreclosures accounted for 40% of all listings in the Phoenix area real estate market. Real estate short sales accounted for 58% of all active metro Phoenix foreclosure listings. However, this is the first month  that Metro Phoenix foreclosures consisted of more real estate short sale listings been REO property listings. This is due to the fact that most of the homes that sell in the Phoenix area real estate market are REO properties and because more homeowners are trying to avoid foreclosures.

If you decide to pursue a real estate short sale, be aware of the "non-purchase money" 2nd mortgage. A non-purchase money mortgage is one that was used for more than the purchase of the house.  For example, a HELOC ( home equity line of credit) is a non-purchase money second mortgage. Such a loan may have been used to consolidate debt, take a vacation, or buy a new boat/car. In other words, the repayment of this kind of loan is for more things than just the house.  In contrast, a purchase money second mortgage was taken out at the time of purchase and used exclusively to buy the house.

Lenders who hold the note for a non-purchase money mortgage are far less likely to let the homeowner walk away from the house without repaying a higher portion of the loan. Many feel that the homeowner will still be enjoying the benefits of their debt consolidation, vacation, or new boat/car long after they sell their home on a short sale. Therefore, they feel the homeowner should take more financial responsibility and may ask them to sign a promissory note for up to one half of the second mortgage.  Many times these promissory notes will be "zero" interest loans for up to 15 years.

So here is the real problem: if the listing agent and seller don't do their homework up front (to determine the intentions of the non-purchase money second lender), a buyer could be waiting up to three months to negotiate  a short sale -- only to find out the second mortgage requires a large promissory note and the seller refuses to sign it.  When this happens the second mortgage holder will not sign off on the sale of the home and it's will go to the trustee's sale. The buyer has invested months of emotional commitment to the house only to have the deal blowup.

Metro Phoenix foreclosures, April 2009

My last couple posts detailed the sales of Metro Phoenix foreclosures in April 2009.  They provided a broad picture of the sale of REO property versus the sale of real estate short sales.

If you read this blog regularly you know that I do a detailed analysis of 10 cities in the Phoenix area real estate market. Here is a link that provides a comprehensive analysis for Metro Phoenix foreclosures for the cities of Ahwatukee, Chandler, Gilbert, and Glendale, Town of Maricopa, Mesa, Phoenix, Queen Creek, Scottsdale, and Tempe:

Click here for the report.

Phoenix foreclosures -- REO property vs short sales -- Phoenix area real estate, April 2009

Yesterday I posted that 75% of all sales in the Phoenix area real estate market were Metro Phoenix foreclosures. Today we'll take a look at how many were REO property and how many were real estate short sales.

The chart indicates that 6,402 sales were Metro Phoenix foreclosures in April 2009. 5,575 were REO properties and 827 were real estate short sales.  That makes for an 87.1% to 12.9% split, favoring REO properties.

Short sales have been gaining popularity over the last 18 months.  More people are making an effort to salvage their credit by avoiding foreclosure.  Additionally, there are many companies that will help you negotiate your real estate short sale.  Negotiating your short sale can be a lengthy and time consuming process.  Nonetheless, most people would agree it's worth the time and effort.

Sale of foreclosure properties steady, April 2009 -- Phoenix area real estate market

The sale of foreclosure properties has accounted for 75% of total sales -- for the last four months -- in the Phoenix area real estate market.

It's almost hard to believe that in June of 2007 foreclosure properties accounted for only 4.3% of total sales. Like the old commercial  used to say -- "you've come a long way, baby!"

Here's how the chart reads: in April 2009 there were 8,560 residential sales.  6,402 were foreclosure properties (REO property and real estate short sales), accounting for 74.8% of all sales in the Phoenix area real estate market.

Lending "Warehouse Lines" change acceptable debt ratio

by Craig

Yea, yea I know…. If you read every email about lending changes you would never get any real work done…

You should know about these changes.

You know banks are tightening up on everything. You may also know that MI (mortgage insurance) companies have tightened up on everything and they have their own rules to meet in addition to the banks rules. 

You may not know much about Warehouse lines. That is where we get the money to fund the loans.  Our company last month April closed 65 MILLION dollars of loans. Our warehouse lines funded them and then they are sold to the investor:Chase, Wells, Citi, B of A, etc… and the 65 million comes back on the lines in the next few weeks and we do it all over again.

Even though they may only have their money out 2 weeks -- and the loan gets bought by Chase or some other bank -- they are making their own rules. So the "warehouse line" is now telling us that in order for us to use “their” money lines we can not have loans over a certain debt ratio… they have many other rules as well.

What if FHA will ensure a loan and Countrywide will buy it - - - too bad.  The "warehouse line" says no.

So new ratios for all FHA loans are 45% - don’t bother writing that down as it will change in a few weeks.  So if we run a loan through the FHA automated system and it has a 46% debt ratio and it meets all of FHA’s guidelines and gets approved - that does not mean that we can fund it. We have to get past the warehouse line, the MI company, FHA, and the investor who buys the loan. All 4 have their own rules. And they keep changing frequently.

If the borrower was approved prior to 5-1-09 then we can still close a loan with a higher debt ratio but that should phase out soon. Way more hoops to jump through than even a few months ago -- and we thought that was crazy.

Housing recovery -- we need more buyers across the entire spectrum

I recently read an article in Realty Times that makes sense.  The theme of the article  was that the "housing market will have recovered when sales are spread across the price ranges (even if those price ranges have dropped)." Are we starting a housing recovery? Foreclosure properties are selling at a rapid rate in the Phoenix area real estate market.The signs appear to suggest "yes," but ...

The majority of buyers in the Phoenix area real estate market are reentering this housing market at the very low end. These buyers are made up of investors and first-time homebuyers. Many of them are concentrating on the areas that feature affordable housing in the "under $100,000 price range." Many of them are acquiring foreclosure properties and are helping to reduce the saturated market of foreclosure listings. 75% of all sales are foreclosure listings in the Phoenix area real estate market.  Increased sales mean the start of a housing recovery, right?

Of course we are glad that first-time buyers are getting into the market -- but there is more to be done.  The sales of these kinds of properties does not have the effect that "bottom of the price range" sales normally have -- they don't create move up buyers.  In other words, when a two-bedroom townhouse sells it doesn't result in the sale of a three-bedroom house.  Therefore, it results primarily in the reduction of bank inventory.

So how do we create move up buyers? That's the real challenge because "normal" (not foreclosure) sellers cannot afford to move up if they have to match the pricing of foreclosure homes to sell theirs. That is why so many "normal" homes sit on the market.

Here's another perspective by looking at the median price of homes.  The median price of homes is constantly talked about in the media. The median is the midpoint. In other words, an equal number of sales occur below it as occur above it. It can be a useful number to track -- but it can also be misleading. Suppose there were 5 sales, and that they were at 10, 8, 6, 4, and 2. The median would be six. Now, suppose that there were 7 sales, and that they were at 10, 8, 6, 4, 3, 2, and 1. Now the median would be 4. There would be more sales. The median would have dropped. But the sales at the higher end would still be the same.