Surprise Real Estate By Mike Horton

Should I Buy A Home In Surprise Az?

Mike Horton — Mon, 23 Jan 2012 01:04:00 GMT

There are about as many opinions about buying houses in this market as there housing experts. If you are someone looking for a new home for their family there are four really good reasons to consider Surprise. Check these answer to common questions. 1. If prices can still fall, why should I buy now? Most buyers want a great value in a home, but lets really look at value. Many buyers who are not investors are most likely going to be paying a mortgage. Right now it is hard to believe the interest rates...(read more)

Foreclosures Median Values Make A Difficult Buyers Market

Mike Horton — Mon, 17 Oct 2011 00:43:00 GMT

The latest information reported recently by “The Republic” newspaper on the median value of homes in the Surprise and surrounding area has shown a decrease in home prices from 2010 to 2011. But does that mean that homes in general have decreased price? Don’t believe it. As a buyer you may experience the frustration of putting in an offer at list and finding out your offer is in backup position. Buyers in the under $80,000 and even up to $150,000 are already experiencing a very difficult time getting a contract in before all the other buyers. Remember I am not talking about you having a low ball offer and getting beat out I am talking about a list price offer. So let’s look at the numbers then talk about what this really means.

Surprise median value % change 10’-11’ %change 06’-10’

85379 121,000 -6.2 -56

85374 127,000 -1.9 -49

85378 88,500 -19.7 -62

85388 118,500 -5.2 -56.1

85387 187,000 -7.8 -41.4

El Mirage median value % change 10’-11’ %change 06’-10’

85335 65,000 -11 -69.8

Waddell median value % change 10’-11’ %change 06’-10’

85355 145,000 -5.9 -48.7

Wittmann median value % change 10’-11’ %change 06’-10’

85361 145,000 0 -55.4

First remember that median values are not average values. Median is the total number of homes sold divided by 2 and whatever the price of that home is the median value. The huge number of foreclosures drags the median value down. In many areas now when I run comparative analysis I will see one group of homes at a very low level and another group of homes at a much higher value. Thinking of this as two humps can help visualize the problem with foreclosures and short sale homes at one end and traditional homes at the other. This creates a valley with few homes in the middle. So the more foreclosures you have the more the media value drops since with few homes in the middle the median value is heavily weighted towards the distressed values.

Now how does this impact homes that are traditional sales (that includes flips). A nice home with a minimum of work is often priced at the high end of the market. These sellers believe they have a premium pricing position because the home is in good to great condition and will not have the issues associated with most distressed homes. First these homes are receiving multiple offers at or above list price. With a financed offer, the biggest problem comes with appraisals. In general the appraisals are very conservative which may create a financing issue. Cash offers don’t have that problem and a smart cash buyer will be at or very close to list. That way even if they are not the highest priced they will be close enough to make them the better offer.

So what does this mean to buyers? If you are looking for clean, move-in ready homes that are not distressed, you should expect to pay market or maybe even more than the average price. Most distressed homes are going to need carpet and or paint and cleanup. These are the homes that are in the bottom price range. I advise clients to figure $5,000 to $10,000 in addition to the home price to make it move in ready. If you don’t want to work with homes that need some work initially, then you should plan on paying at the top of the market. Think I am kidding, just talk to buyers who have put in 2,3,4, or more contracts to get beat out by others because they under bid before they were able to get a home offer accepted.

If I am looking for the cheapest homes, I would focus on those zip codes with the most change from 2010 to 2011. Looking for move-in ready homes, then focus on those zip codes that have seen relatively small changes from 2010 to 2011. If this searching all looks complicated it can be. That’s why many of my clients look to me for reports that help them understand the demographics of an area and to homes that not only fit your price range but give you the best opportunity to get the purchase offer accepted.

Why do you need good credit?

Mike Horton — Thu, 18 Nov 2010 06:09:00 GMT

OK, so you have bad credit and you pay cash for everything. So who cares if your credit is bad? The fact is that your credit history not only may keep you from getting a loan for a car or maybe even impact your ability to get a job. Just look at some of these examples below and good credit begins to look like a requirement for the good life. Insurance premiums for your car, home, life and just about anything you can insure is impacted by your credit score. The worse your credit the more it costs....(read more)

Short Sale Home - Nobody home - Do I drop the home insurance to save money?

Mike Horton — Thu, 11 Nov 2010 06:38:00 GMT

Dropping the home owners insurance when you have left your home and you are short selling the home could be a disaster! In a distressed home sale, homeowners that are no longer making their mortgage payments often forget about the home insurance. If you are not making the payments then your lender is not preparing to pay the home insurance when it is due. Even if you feel you are "tapped" out, this move could cost you thousands. In a short sale you still own the home and you are still responsible for the home and have a liability for the home. What is if there is an accident in the home from a door that was left open or glass that was broken by a baseball and someone get hurt. Who will the injured party sue for damages, it could be you! If the home has damage due to a toilet water fill that breaks and floods the house, what about the damage? All of these things do happen and can happen to you. If there is damage to the house the lien holder(s) may sue you for damages, called "waste" to the house. In a law suit the lien holders could elect to sue for the damages and you could loose the protection you may have received when you sold your home for the difference between the sales price and the mortgage value.

Your insurance company can provide the information to you about when the insurance policy is due. Insurance companies may have to adjust your policy if you no longer live there. All in all it is important to remember that until the house is sold or a foreclosure event happens and the deed tis transfered from your name, you are responsible, it is still your home. But don't believe me, call your insurance agent and find out exactly what you have to do to protect yourself from additional financial risk. Ignore this and things could get worse.

Strategic Default - is it a moral question or only a financial decision?

Mike Horton — Mon, 18 Oct 2010 05:32:00 GMT

You own a home purchased for $400,000 and now it valued at $200,000. Do you take a foreclosure or short sale the property even if you can afford to make the payments? Regardless of how much you paid for the home, if you are going to let it go to foreclosure or sell it as a short sale and you could afford to keep it, thats called a Strategic Default. In the past this was only a term that applied to commercial properties and businesses where the decision was based on profitability. In the residental market a Strategic Default is more likely to occur when market prices for homes drop dramatically and the home is "underwater". In today's market, home owners in places like Florida, Utah, and Arizona prices have seen home values drop by 50% to 60% accross the board. At projected market growth rates of 2% to 5% a year, there is very little possiblity that the home will be worth the original investment anytime before the loan is paid off. So home owners faced with this have to ask the question, " Is my home an investment that should be treated as any investment where you consider profits and losses in your decision to keep the home or is it your "home" and a part of the American Dream where you feel it is a moral obligation to make the payments even if you or your heirs may never see a return to the original market price?"

I have heard from many ardent supporters of both positions. In dealing with more than 100 distressed property sales and providing information to at least that many more homeowners I have come to the conculsion that there is no simple black and white answer. In the case of an investor that has purchased 1 or more homes for the purposes of building a home rental business, a strategic default comes down to a decision as to the investment in these homes and is it meeting the financial objectives. If not, then the home investor that considers the Strategic Default as their option must be willing to consider the ramifications. Dropped credit ratings that often directly affect the investors ability on both personal and business levels to get loans at reasonable rates are just one of the impacts. Federal tax implications may be a major issue. The lien holders on the property may decide to pursue the deficiency on the loan through the courts after foreclosure. In Arizona that pertains more to non-purchase money liens on the home. The smart investor will take a long look at the implications with his Realtor, lawyers and CPA. There are a lot of monetary issues to consider to get to the bottom line. But getting back to the question, should this only be a financial concern or is there a strong moral issue to consider? I like to think of this like the stock market and if you were managing a portfolio of stocks for friends and family. Would you sell certain stocks when the prices are falling on one stock hoping to put the money in another stock that would have some growth potential?

Lets take the homeowner who is currently living in the home, makes enough money to make the payments and really has no hardship. Lets assume their purpose for selling is to buy another home with the same or better features at significantly less cost. Wikipedia gives a definition of moral as "In its "descriptive" sense, morality refers to personal or cultural values, codes of conduct or social mores that distinguish between right and wrong in the human society. Describing morality in this way is not making a claim about what is objectively right or wrong, but only referring to what is considered right or wrong by people." In the US, the home has always been sacred. Paying your mortgage indicated that you were of "good standing", an "honest citizen", " a person of character" and well, I am sure there are many more descriptors. In todays society with deficiencies of $100,000 plus not unusal with middle america homeowners, this has become a gray area. If you don't have a hardship why should you be allowed to sell your home for less than owed? Techinally, the only reason is if the bank wont' take less than what is owed and you don't want to make up the difference. Morally, there still seems to be general feeling among middle America that a strategic defaul on your home is irresponsible, that a defaulting home owner should face negative credit problems for long time periods and this type of behavior is just another blow to the economy.

So is a Strategic Default good or bad or just a financial decision. From my perspective when you run a buiness you put the numbers to it, consider your objectives and make a financial decision that meets your objectives. For the homeowner, it always comes down to you the homeower and if you are willing to take on the consequences. I still believe in the American Dream of home owner ship and it's responsbilities, but I also believe in individual rights of ownerhip. Make the consequencies such that no one can consider a Stratgic Default trivial and then let each home owner make that decision.

Changing the Arizona Short Sale Addendum

Mike Horton — Sun, 26 Sep 2010 06:08:00 GMT

In Arizona our state association (Arizona Association of Realtors; AAR) has strived to generate standard contract forms that provide consistency to business of buying and selling real estate. When the short sale of property became a significant factor in real estate sales the Short Sale Addendum to the real estate purchase contract became a part of the tools agents needed in a transaction. What was once a significant help in protecting buyers in a short sale transaction, has become liability in the process promoting buyers and buyer’s agents to write many contracts that were never destined to be executed. In fact this form has:

increased the number of foreclosures we are experiencing in Arizona
provide an unfair advantage to the buyer
increased poorly written contracts that don't provide adequate protection to the buyer or seller in a short sale transaction
significantly increase the liability of agents in a transaction

It is time we change the short sale addendum to address the changes in the market. It is time the short sale addendum provide fairness to both buyer and seller. It is time that the short sale addendum be modified to decrease the liability that faces an agent.

Owners with homes that are in the short sale process are often forced to stop payments in order to have the servicing agent (i.e. the bank) begin the short sale process. Both Fannie Mae and Freddie Mac backed loans require the owner of the home to be in default or in eminent threat of default before they allow the bank to begin evaluating the owner for the short sale process. This creates a time line that for the owner to successfully have a short sale transaction negotiated before the trustee sale. Most banks (ie. at the direction of the investor who holds the mortgage lien) will initiate foreclosure proceedings at the time the lien is 90 day late and set a trustee sale date about 30 days later. While agents can occasionally get a short sale transaction to process in less time than the foreclosure process, that is not typical. Even though I hear about sellers and agents who got approval in 10 days or 30 days, the realty is many short sales never close due to foreclosure. Why is that? When a buyer puts an offer on a home that will be in the short sale process, line 41 of the Short Sale Addendum allows the buyer to cancel ANYTIME prior to receiving the Agreement Notice from the Seller. This is a non-binding offer. Buyers will write offers on multiple homes and take the first one that comes through. More frequently than not, the offers that the buyer is no longer interested in are no longer addressed by the buyer’s agent. The seller mean while has been diligently working to get the short sale agreement notice from the lender. If offer is no longer viable and the seller’s agent finds this out, then that agent should inform the bank that the offer is no longer good and that they are seeking a new offer. This creates a situation where is they are in the foreclosure process and the trustee sale is coming up, the only way the bank will stop the trustee sale in most all cases is with a new offer ( and sometimes the bank will only allow a certain number of extensions or no extensions). If the offer is not canceled by the buyer’s agent (which does happen but not all the time) then the seller may not have enough time to get a new offer and the home can slide into foreclosure. Anyone who is involved with short sales on a regular basis has had this experience. There are more scenarios we could discuss that create conditions for trustee sale (the result of the foreclosure process) but my example above illustrates probably the experience most sellers have when the home is lost.

In today’s market the Short Sale Addendum is unfair to the buyer. Buyers can cancel at any time without any sort of commitment. Sellers have to put their property into the foreclosure process to get the short sale process started in the vast majority of short sales. The only defense the seller has when faced with a non-binding offer is to consider replacing the offer with a new buyer that is willing to commit at least staying through the negotiation phase. And by commitment, I mean opening escrow with a modest earnest deposit of say $1000 on a property that is not available for refund until the agreement letter or a mutually agreed time is written into the offer. I won't go into the specifics, except to say that the real estate transaction has always been based on a commitment by two parties to complete a transaction. In the short sale process as we know it today that commitment is not existent. Before I get to far afield of this specific point, I have often had pointed out that lines 13 - 15 provide the protection needed by the seller. This is a red herring.

First and foremost, banks are looking for the net that meets the requirements the investors have set for them. They don't evaluate contracts as to their quality or enforceability, just their bottom line. When a 2nd offer comes in, an assuming the first is non-binding, the seller’s agent has to help the seller decide what is best to do in the situation. If the bank is in document collection, accepting and presenting a new offer to the bank may be the best to do for the seller. But even if the 2nd offer is better, the seller’s agent must consider where they are in the process. When the financial evaluation is going on, a new offer may create confusion with the bank. Resets of the process are not unusual causing weeks of delay even under the best of circumstances. We all know that the quantity of homes under consideration by each negotiator is usually enormous. These weeks of delay can cause the buyer to lose heart (it’s a lot easier when there is nothing to lose) and drift away from the offer to another. If the offer has been presented by the bank to the investor, this could cause a significant glitch in the process with many weeks delay as the banks offer to the investor must be reworked. During this time unintended consequences can go rampant; BPOs that are no longer usable because they are older than 90 days; the investor may not allow any more extensions to the trustee sale date and the home goes into foreclosure; paperwork is lost; the file is passed to another negotiator based on the phase of the negotiation and then must go back in the process. More delays and more delays. Murphy's Law works overtime in this process.

What about contracts and how they are frequently modified to protect the seller or provide more protection to the buyer. Article 26 provides agents in Arizona with the right to write and modify real estate contracts. These are legal contracts and all of the ramifications of writing a legal contract apply. Typically we are concerned about saying to much outside our discipline of real estate, like advising someone on bankruptcy. But what happens when you do not adequately explain a paragraph and the implications when written by another agent in your discussions with your client? What happens when you accept a clause in the contact such as eliminating lines 13-15 of the short sale addendum when written in a non-binding offer and the buyer fails to perform and the seller goes into foreclosure? What happens when you write something in the short sale terms and conditions that the deal to fail or maybe your buyer's earnest money is tied up for a long period of time after you have canceled your offer? You might say, well just give to the seller and let them make the decision and recommend they go to legal counsel specializing in real estate. What I am hearing is that is insufficient to protect the agent. The error of omission can be as bad as the error of giving advice outside of your expertise. Agent’s liability is increase and sellers and buyers have protection that is maybe inadequate for the process.

In the short sale process, buyers have all the advantages with the standard short sale addendum focusing on providing them with the ability to cancel at anytime. Sellers can only be protected by performing significant surgery on the short sale addendum. An even then, when the agreement letter is presented and technically the offer become an executable contract, buyers often demure. They have bought another home or maybe they have buyer’s remorse and just don't like the home. Many will never even open escrow. When that happens the seller no recourse except to obtain another offer at the last minute if possible or try and force the buyer to open escrow and go through the motions which is really a waste of time.

My goal of this blog is not to discuss if distressed sellers are deserving of protection. It is not to say we should have or not a short sale transaction. it is to say that the process has to be changed such that we real estate transactions that are as close as possible to what I will call a straight sale where we have committed buyers and sellers, where buyers and sellers are on equal contract terms and where the real estate contract has meaning and the protection it provides to both parties is what we intended it to be.

In a future blog I will recommend changes to the short sale addendum.

Arizona Short Sale Addendum Encourages Breach of Contract

Mike Horton — Wed, 01 Sep 2010 06:27:00 GMT

The Arizona Short Sale Addendum used by AAR promotes contract breach. Line 40 and 41 of the addendum state that the "Buyer may unilaterally cancel this Contract by notice to Seller at any time before receipt of a short sale Agreement Notice from Seller." The general perception by real estate agents is that means at any point until they open escrow a simple letter of email can effectively break the contract between buyer and seller. This one line is considered a free pass by many buyers and agents and they could not be more wrong.

Lets take an example. The buyer and seller enter into an agreement to purchase a house under short sale conditions. This offer is submitted to the sellerslien holder(s) and over time the sellerslien holder and the seller reach agreement and the buyers agent receives an Agreement Notice. At this point the buyers agent often indicates that they have 1. bought another house and by the way forgot to inform the listing agent the buyer is no longer interested or 2. no response from the buyers agent at all or 3. the buyers does not want to open escrow until later until after they have had time to look at the house again or maybe see if another deal might open up holding the seller as hostage. All three of these scenarios are counter to lines 26/27 which states the "Buyer shall promptly open Escrow and Deposit Earnest Money as described in the Contract upon receipt of Agreement Notice." If you have been doing short sales over the last several years these are common occurrences. I have several boxes of canceled contracts to prove it. So lets take a look at first one.

In this case the buyer has already purchased and no notice sent to the listing agent. Listing agent sends agreement notice. Buyers agent says sorry already purchased, we cancel. Is that a legal cancellation? Not according to the short sale addendum lines 41. Can we just tear up a contract? The response should be to Cure the buyer to open escrow. If the buyer does not respond and if after the inspection period (which started on the delivery of the Agreement Notice) would there not still be an executable contract if the seller does not want to cancel? I think so. What about a financing contingency if present? If the buyer does not try to get the financing stated in the contract that is also a breach. Given this, would the seller have the ability to take this contract to arbitration or additional legal actions to force the purchaser or to receive damages from the buyer? Scenarios 2 and 3 follow the same line of thought.

The short sale addendum should be changed to have buyers open escrow as soon as they have buyer and seller acceptance of terms. The escrow should be committed for a reasonable amount time, say 60 days and should the buyer cancel prior to the 60 days or receipt of the Agreement Notice, the money should be used to compensate the escrow company. At the agreement notice or after the 60 days with no agreement notice, the buyer could cancel the deal and get a refund of earnest money. The money could also be returned to the buyer if the seller executes his right to present a subsequent offer(s) to the lender. This woudl keep the buyer and buyers agent committed and encourage proper cancelation of the contract. Not a perfect world for either the buyer or the seller, but at least one with less ambiguity.

Why not write an offer at 50% below list price for a short sale home?

Mike Horton — Fri, 13 Nov 2009 06:43:00 GMT

OK, you have been looking at homes that are in pre-foreclosure for sale (short sale) and you found one you like. It is in good condition and not a major fix up. Your next step is to write an offer and for arguments sake lets say it is listed for $150,000. Before you write that offer you check out what has sold in the immediate area over the last 3 months and determine the list price is at current market. Now you have to decide what price do you want to offer. Thinking back over what you heard or read in news reports or heard on TV or Radio commercial about making offers on distressed properties you decide lets really discount the price and write your offer for $100,000. The lender (who has final approval) will negotiate right?

In essence, you have put yourself in the worst position you could have. In the current market, lenders know that there are a lot of buyers trying to find homes and they are willing to pay market or close to market because prices are at the bottom. Wait you just heard that the market was still decreasing. Check the market facts not the hype. In Surprise in all zip codes, the market bottomed out in April, May , or June of this year. It came up a few dollars per square foot since then but has remained steady, The number of buyers are keeping homes from further decreasing in price, its a competitive buyers market. As luck would have it, there are enough foreclosures and pre-foreclosures keeping the market prices from raising appreciably. So in effect the market for homes is between two forces holding prices steady. So why should a lender approve a short sale with a deeply discounted offer? They won't, they know they will get a better offer.

What will they do? From my experience there are a couple of reactions. First they come back with a price that is about 10% less than market. That seems to be bottom spot for them. Then they will often ask for a substantial seller contribution in the range of $5,000 to $10,000 cash from the seller at closing. Note that they also will often provide a promissory note option payable over 10 years at 0% interest for twice the amount (looks like a hidden interest to me but that is another topic). So now you have set the tone that says you must meet their new price (this is extent of their negotiation) and the seller has to come up with substantial cash at closing. What are the odds this will happen?

When you go to a seller and ask for a cash contribution, the most common comment I get back is "If I had that kind of money I would not be short selling my home". So where are you now. As the buyer, you can walk away from the deal or your can make the cash contribution. This is where you have to make the decision, could you have made the offer at a price where the lender would have been willing to take it without a cash contribution from the seller? If you did then the money you would have spent would be in the mortgage and not cash out of your pocket. This is a value of money decision. Buying home at super low prices have passed this market unless their is something very wrong the home.

The second response is that tell you it is not enough. Sometimes that continue with additional price guidance and sometimes you have to guess. Believe me that's when your offer drops to the bottom of their pile.

The second issue is that you are competing against other buyers. The listing agent has the responsibility to provide their client with the best opportunity to short sale their home. if a better contract comes in, a listing agent has the right to swap yours out. The listing agent wants the home to sell as quickly as possible. Unless you modify the short sale addendum, an offer can be replaced at the lender anytime prior to receiving a letter of acceptance from the lender. If you are serious buyer, you contract maybe replaced and you may or may not know about it until it to late. The listing agent should let you know when you are no longer in the primary position, but it doesn't always happen.

Your best bet as a serious buyer is to write your offer such that the sellers lender, who must approve the offer price and provide their additional conditions, will see the offer as just meeting its requirements for not asking for seller contributions. Lender negotiators are more likely to review the offer quicker and not find reasons to put it aside for future review and allow you as the buyer to decide the amount of leverage you want in your transaction at the beginning and not under the pressure of losing the home purchase from having to make larger cash contributions then you are comfortable with at closing.

Remember the critical issues. Know your market, know your comps, find out who the lenders are and what are their requirements for an OK, know what additional costs you may have to pick up for the seller, and know what mortgage and cash levels you are comfortable considering. Short sales are very little resemblance to a non-distressed home sale. You are going to need someone who has the experience to provide knowledgeable advice on what is a complicated process.

Short Sale Quirks

Mike Horton — Tue, 10 Nov 2009 04:46:00 GMT

Imagine you are in the final stages of your short sale negotiation with your lender. You haven't received the final OK, but they have completed and recorded their price opinions and from their own time line and your experience, you know the lender is going to give you an agreement letter soon. The buyer is still holding true and the magic day comes. Your seller is happy you contact the buyers agent and he informs you they just bought something else or they have just had a change of heart. A little buyers remorse maybe. Talk about a downer for the seller and listing agent! But is everything lost....nope.

Now is the time to start down the list of backup offers you have been accumulating. As you look at each one your consider them for a couple of factors. First is the asking price the same as the previously approved offer. Then do the seller concessions provide the same or more net return to the lender. Most lenders will have approved the original offer by buyers name, list price, net to the lender and to the 2nd, and accumulated cost to close. Since you have a new buyer the original lender approval will not be valid. Well how bad is that? Depending on the lender, some will just make minor changes to the agreement letter and send it back. But unfortunately that is not the norm. Most lenders will take 2 to 3 weeks or maybe more to send the package back to the investor and have them reevaluate it. If the lender approves it and sends you a new agreement letter you have been delayed some time but you still have deal.

Does it always happen nice and clean? Not really. Often the price opinion is now past 90 days and they have to order a new one. That will add 2 to 3 weeks to the approval. If they have taken a long time to evaluate the offer, they may also ask for updated financial information. Some lenders have already passed you to a closing agent. The agent that did the original evaluation is off to other distressed loans. The list of things that can go wrong from here just builds. It will work out however, but now more time and more patience is needed. So is there a solution? Use a strategy to help prevent the crisis. Help the buyer to make a stronger commitment to the deal. Ask for non-refundable earnest money from the buyer to show commitment all the way through the lender approval process. Buyers are more committed. If they refuse, then the next buyer that comes up that meets the market price and is willing to provide non-refundable earnest money assumes the lead position. The Short Sale addendum in Arizona approves this strategy and Realtors should take advantage of it to improve the sellers short sale negotiation with the mortgage lender.

Surprise Bond Elections

Mike Horton — Mon, 26 Oct 2009 16:56:00 GMT

Surprise – a growing city or stumbling subdivision? The Surprise bond election on November 3rd will answer one of the most important questions we as a city have to decide. Will Surprise move on towards a fully integrated community where there are many types of businesses offering a full range of job opportunities providing diversity in families across the income and age spectrum? Where young and old can flourish together and where families can enjoy time together? Or will Surprise become a...(read more)

Can your lien holder get a judgement after a short sale?

Mike Horton — Sat, 12 Sep 2009 03:58:00 GMT

Anti deficiency ARS 33-814 provides protection to the borrowers in some cases against a deficiency judgement when their property has gone through a foreclosure. In many cases, it appears the lenders are recognizing the limitations this statute puts on them to obtain a judgement after the deed transfer takes place and they are willing to allow a short sale. In a Short Sale there is nothing that prohibits them from asking for seller contributions as a part of the demand letter stating the conditions that they are willing to accept to release the lien on the property. Conditions could include additional monies at closing or a repayment of all or part of the loan over a period of time. This applies to any deed of trust lien on the property.

Any lien in anything other than the primary position is wiped out during a foreclosure. In some states which don't have an anti-deficiency statute, the lender can pursue a judgement against the home owner. The Arizona Anti Deficiency statute prevents the lender (primary or otherwise) from seeking a deficiency judgement against the foreclosed property owner if the property is 2.5 acres or less, is used as a single family or single two family dwelling and the lien(s) were used to purchase the home.

In a short sale, the Anti-Deficiency law does not apply. When an offer has been evaluated by the lien holders in a short sale they will provide a letter which states which conditions the lien holder is willing to release the lien. The primary lien holder will have the final say on how much money of the total purchase price will be assigned to each lien holder. The amount of money the suborinate lien holders want may match what the primary lien holder wants or it may be more than what is provided. The seller (owner or designate) will have to negotiate between the primary and subornate lien holders to get the best possible resolution to be able to sell the house. This usually entails restating seller financial conditions that caused the loss in the first place, describe the current market conditions and provide additional information to sway the subornate lien holdes to reduce their demand to match or come close to what the primary lien holder wants to provide. If the primary lien holder will not provide enough money to satisfy the subnornate lien holders, you may be able to get terms. The amount of wiggle room you have is dependent on the assest owners guidlines and your ability to provide supporting information. You are working with a system that has little regard for the individual problem and is more focused on the overall financial picture over many liens. The servicing groups, lenders and investors have their guidlines and those are not very flexible.

When the negotiations have been complete, the seller (owner) has to decide what they can afford financially to meet the lien holder demands. If they can not or will not meet the lien holder demands there are two options. First is to try and split a part of the lien holder demands with the buyer. My suggestion for sellers and their Realtor is to work with the buyers and buyers agents to see if there is a way for each party to contribute to the lenders demands. The buyers are typically getting a very good value, so while there is often a lot of grumbling, buyers are often getting a great deal anyway. This is very dependent on how well the buyers agent can represent the value of the property, understands the short sale process and sets buyer expecations early in the game that this type of problem may stick its ugly head up. It is a team effort to get these negotiations done successfully and being up front with everyone when this problem comes up is critical to success. In some cases the issue becomes highly emotional, so its important that everyone look at this from a value perspective to the buyer and the seller realize that over the long run closing the short sale will have more long term financial advantages over the short term costs.

Most certainly I recommend for buyers and sellers to talk to a real estate attorney who deals in residential issues for more clarification on the Arizona Statutes concerning anti-deficiency.

Help with Laveen distressed properties

Mike Horton — Sun, 26 Jul 2009 18:44:00 GMT

Note that this information is outdated.

Mike Horton, Realtor with Century 21 Arizona Foothills, is ready to help homeowners with mortgage problems to short sale their home. This is a complex process that requries experience and knowledge about credit, taxes and lenders. Many Realtors have limited experience, go with a specialist whose knowledge and everyday work with lenders can help you through this difficult time.

Short Sales are not easy sales, for anyone!

Mike Horton — Sun, 12 Aug 2007 19:47:00 GMT

Short Sale is the sale of your home where you are unable to sell the home for the amount owed to the lenders on the home. Those are not words any of us like to hear. In Surprise Az we are beginning to see more of this activity all to frequently. And it's not happening to bad people, just everyday people who have been caught in a mortgage trap. The only way out of this trap for many is either foreclosure or selling the house with lender approval for less than it's mortgage. I have the experience to help out sellers, and an experience it is. Be sure the Realtor you pick has gone through this process or you could could have more problems and lost opportunities.

Homes can be purchased under short sale conditions by a savvy buyer. But not without a lot of work for the buyer, seller and myself as the listing agent. When a home is in a SHORT SALE status, that means the seller's lender is willing to accept offers and payoff at huge discounts from what is owed. That applies of couse to both the primary and secondary lenders on the home.

As a buyer you won't see a lot of difference in the contract, just the time to get everything done. Lenders are dealing with many short sales at the same time. So the buyer has to be patient just to find out if there offer is accepted. That can take as much as 6 weeks. As the selling agent, I have to develop a relationship with the lender so the deal does not end up on the bottom of the pile. One of the processors I worked with had 120 deals to consider sitting on their desk. You may be working with an initial contact person, processor and someone to coordinate the final closing. And don't be surprised if some of these people change in the middle of negotiations!

The lender will only take a certain amount for payoff and will include all expenses in that amount. So frequently the buyer has to pick up some expenses you might expect the seller to pick up normally. There is special paperwork that is required by the lender and they may required other actions over and above what we normally see. What all this means is that the selling agent must be attentive, the buyer must be patient and willing to negotiate to get to the price set by the lende.

The seller has to be willing to insure the property is ready to sell and responds quickly to lender information requirements. Good prices for homes can be obtained, but this is not for the impatient or the faint of heart. With my experience, I can help smooth the way on this very rough road. Either as the sellers or buyers agent, there is a lot of work, negotiation and perseverance that is needed to make these deals work. Oh, by the way, there is also significant tax ramifications to consider. but I will save that for another time.

Surprise is growing up

Mike Horton — Mon, 25 Jun 2007 07:42:00 GMT

With every new organization or body of people, growing up can be hard to do. The recent disclosure by the City Manager about how the City Council has been doing business is an excellent example of how messy things can be when growing up. The fact that their seems to be a lot of back door, Smokey room politics and arm twisting is not surprising. When people have been making decisions over coffee with their neighbors on the backyard fence for years, its tough to change. But change it must. The current city council has become more like a bloated group of corporate managers who have been in their jobs way to long. As often will happen, some of the good folks are going to get hurt as well as the ones that should have left a long time ago. Where's the corner chair and time out when you need it.

But growth can also be positive. I am speaking about the job the Economic Development Group is doing in reaching out for ideas and then providing feedback in terms of their newsletter. They are one example of what looks like a group of city employees that are trying their best to be proactive and help the city of Surprise grow up. Two stars for this group.

Its been my experience in business, that often the leadership team can only take you so far. Its time for a new team in Surprise with modern and open methods of providing guidance and receiving guidance from their customers (the citizens of Surprise). It is often not very easy, since alot of us (that includes me) often speak without having all the facts or insight we should have. Well its just human nature and the new city council needs to make above board communications and openess a key to their terms. The current council empowered a city manager who has built a good team, but now its time to take that retirement package and go enjoy it. Somewhere along the way they lost the map. Till the next time.

Believe in preparing your house to sell

Mike Horton — Sun, 08 Apr 2007 05:01:00 GMT

Often we hear real estate agents telling their new listings that the house needs to be cleaned up, remove clutter and provide a neutral palette for the buyer to put their touch on. It is tried and true advice that often works, but many people seem to just ignore it. They often give comments like "I will give a carpet allowance" or "I will offer a paint allowance" or "I don't have enough time or money". Well, I want to provide you with one real life experience that drives the point home. Let me explain.

I took over a listing on a home that had been on market for 6 months. The home was priced about 5% too high, but the owners had a great back yard (in Arizona, that often means grass and trees), the house was vacant, tile floors ( a good grade of tile) and carpet that was about 7 yrs old (still serviceable but looking tired). Sounds like the first thing to fix was price, so when I took the listing the price was reduced so it was only about 3% over comparable listings. Still no buyers but we had lookers.

Once price complaints were mitigated, I needed something else to make the home more marketable. Oh I forgot to mention, it was neutral, everything except the beige carpets was white. The fact is the house had no character. It was just too neutral, it was bland, it was like taking a tranquilizer when you stepped in the door. So I discussed this with the owners and frankly it was not to appealing to them because I would not guarantee that paint and new carpet would work. But after reviewing the subdivision active listings, they finally made the commitment to paint and re-carpet.

I put them in contact with a great resource for painting, who did a fantastic job of painting the walls with a nice beige and providing a two tone look by painting the ceilings and trim an off white. The carpet was replaced with a nice but inexpensive speckled Frise carpet. Now when you walked into the house it was warm and inviting, even as a vacant home. Within one week we had a contract at above comparable listings, in fact we sold this house before another of the identical floor plan that had a pool with a very small price differential. Talk about a turn around. Nothing for 6 months and within a week of getting the house really ready to sell, it was gone. And that in a buyers market. This is real proof that preparing your house to sell works!

Finally, yes it did cost some hard earned dollars by the seller to do this professionally. But the result of near perfect paint job and carpet that was not only new but was a perfect fit with the new colors worked to get a good contract. Compare the cost of sitting on the market for possibly another 4 or 5 months and I think you will agree, its better to have your home ready to sell when you first get it on the market then waiting.

Surprise: a city of conflicting appearances

Mike Horton — Fri, 24 Nov 2006 05:22:00 GMT

Over the last several weeks I have read several articles on how the City Council of Surprise continues to have a group that appears arrogant and self indulging. As I read the articles I wonder how this city ever hopes to grow and manage the growth in a responsible way that will benefit the citizens. I took this afternoon (a little time off on Thanksgiving Day) to catch up on my reading and look at some city plans for the Hwy 60 corridor. Granted it was to pick up more information for my real estate business, but non the less it was some fascinating reading. It is hard to believe (see earlier statement) but this stuff is good. I mean it has a lot of thought, it is detailed and as I look at it, many of the questions about how Surprise will grow is there and understandable.

The professionals who work for the City are doing a great job of making information available and understandable. Anyone who wants to open a business, buy land for investment or choose an area to live can get a pretty good idea of what the city and their choice of area will look like in 15 or 20 years. I have compared these plans to ones from surrounding areas. Some are better than others but none compare to Surprise. So when I think of the City Counsel, and all the bickering that goes on, I also have to complement them on the fact they do provide the leadership to City Government that enables an obviously talented group of professionals to do their job extremely well. Now if we can just keep that ugly stuff from becoming the main topic in newspapers about Surprise, people in other areas of the valley might quit laughing about the weird city out west.

I am glad its over

Mike Horton — Mon, 20 Nov 2006 13:33:00 GMT

Yep I am addressing the political campaign. It was pretty ugly in many areas. Frankly, I just got tired of the commercials on TV and Radio. But blasting the opponent unless you have a fantastic lead seems to be the American Way. After all this the most important point of it all is that we were able to select a government, by the people and for the people (sometimes I get the feeling I am not one those "for the people" I have to admit). I was not in the winning majority this time in the polls and there will be another day, just like the other guys said a few years ago. Now I get to whine about the majority not doing the right thing and using the political minority as a whipping post. Not much of a rant, but my wife won't listen so its good to get it down somewhere.

Just for the record, my biggest concerns deal with health care and the cost of health care. I recently had to change from one group policy to another since I am now a sole proprietorship. In looking at plans, they ran from $1500 per month to $560 per month for about the same family plan (just 2 of us) depending of course on the carrier. We ended up selecting a small business group plan at the lower end of the cost spectrum. As long as we don't have too many office visits when we are sick, the cost and deductible are not too bad. What the? (recent radio political ad). Health care costs are just too high and the system itself is out of wack, when you know the reason the doctor has to get you in and out so quick with not much more than a Hi-Bye is that the are not making as much money. Maybe the new congress can do something other than try and create a Canadian type medical system (remember the 90"s) that even the Canadians don't like. Will see if they can focus on that rather than more political games.

I am new at this Blog stuff so this is certainly not as good as a Mark Cuban blog, but you gotta start some where. I think my next entry will be about real estate, since that is how I am trying to add my value to society. If there any questions about that I am probably better able to answer those then political stuff.