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Phoenix Trustee Auctions – make sure you are ready to play with the big boys December 11, 2009

Posted by mkuhbock in Arizona Vacation Property, AZ Real Estate News.
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I did a post some time ago about auctions with a link to a great article that explained the process titled Buyer Beware,  but there is a new article out that goes into the details of how these auctions work. The only problem with the article is that the average non professional investor will read only one thing, how much one professional made in a quick one week flip.

This article can be found here and is titled House Flipping Makes a Comeback. Great article and make sure to look at the slide show but and it is a big but… these people that work the trustee sales are professionals with years of experience and teams in place. They have the cash or the access to cash to close in the required 24 hour period, they have done their research on the properties they bid and purchase via drive bys and walk arounds and even may have had access to the property to assess the repairs it will need. Another issue in the property/ investment flip game is that everyone is now getting into it and the competition for great deals is much greater than it use to be 2 or 3 years ago.

On a  $75,000 to $150,000 flip you will need at least $20,000 net profit on the purchase to turn around a $10,000 net profit on the sale. That is if you have a good Realtor and the all of the market factors of the home are aligned. Properties can drop in value by 25% overnight, (if comparable sale properties in a couple of block radius drop their prices due to being banked owned or going into foreclosure this will affect your ability to sell at your planned price) I have experienced it first hand thus you need to be well healed and have all the necessary resources at hand.

Properties of great value might produce greater margins but will also have greater costs associated in the transactions and are tougher to resell, more first time buyers than those looking for a $250,000 family home. Then when you get into the luxury market you can steal properties but good luck trying to sell it unless you have it on the market substantially below current market prices like the example in the last article.

On a positive investor note it is anticipated that there will be a new wave of properties entering the Phoenix market in the spring, not good if you purchased a home and will be trying to slog it off in the next couple of months but good if you are waiting to enter the market in the early spring.

In any case if you decide to venture down the path of playing the trustee auctions then best of luck in swimming with the sharks. 🙂

Have a great weekend wherever you are!

Michael

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Real Estate is all about self education June 24, 2009

Posted by mkuhbock in Arizona Vacation Property, Uncategorized.
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Regardless of how many personal and professional advisors one has nothing replaces self education, especially when dealing with vacation or investment property purchases.

In past posts I have listed many real estate resources that one can put into their arsenal and frankly you can never have too many available. I recently came across a couple of others that seem to be a little slicker than previous real estate resource sites.

Zillow is of course one of the higher profiled comp sites and they do reflect pricing reality but you cannot bank on the values, it is a great start to your research. Trulia is another major real estate search portal.

A new site called Movoto has just entered into the Arizona market and seems a little more indepth than Zillow but time will tell, again another good research site.

Of course there is the old standby Realtor.com or Realtor.ca for Canada which are the official sites of the National Association of REALTORS® and is operated by Move, Inc. and the Canadian Real Estate Association respectively.

Do not confuse Realtor.com and Realtor.ca with mls.com which is an independently owned and operated Real Estate Advertising Service Company site.

Some other real estate sites I have stumbled across are:

http://www.cyberhomes.com/

http://www.foreclosuredeals.com/

Arizona Neighborhoods.com

Home Finder.com

These are only a few of hundreds of sites but at least it is a start in your education process.

Happy house hunting!

Cheers,

Michael

PS

Here is an interesting article outlining a new program for buyers:

New program yet to help buyers land homes
CNN International – USA
Connolly has been in the Phoenix real estate market for about nine years and has seen the disastrous real estate downturn up close. …

Chandler Arizona Real Estate Market Showing Substantial Improvement April 7, 2009

Posted by mkuhbock in Arizona Vacation Property.
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A positive review by David Lorti

Chandler Arizona Real Estate Market Showing

Substantial Improvement

Buyer Demand for Chandler Homes Rising Rapidly

Chandler, Arizona 4/06/2009 04:41 PM GMT (TransWorldNews)

http://www.transworldnews.com/NewsStory.aspx?id=82526&cat=1

Chandler, Arizona’s real estate market is experiencing substantial improvement in residential activity with lower available home inventory and higher home sales.

This improvement is primarily due to increased buyer demand for homes as a result of lower home prices, low interest rates, and the $8,000 first-time homebuyer tax credit, all of which are spurring interest by buyers to purchase homes.

To understand the changes currently taking place in the Chandler housing market, there are three areas that require review—the number of available Chandler homes for sale, the number of Chandler homes under contract for purchase, and the number of sold Chandler homes.


Available Inventory of Chandler Homes Showing Modest Decline

Available Chandler home inventory has been experiencing a modest decline and is now at a three year low.  The rate of decline is lower when compared to other real estate markets of the Phoenix Metropolitan area where buyer demand is more robust, but Chandler has generally been less impacted by the market downturn than those same communities.

The decline in inventory is largely due to the overall improvement in buyer demand rather than cancellations and expirations of property listings.


Buyer Demand for Chandler Real Estate is Strengthening Rapidly

Buyer demand, as measured by the number of actively marketed Chandler homes currently under contract for purchase in Chandler, is showing impressive improvement.

25.6% of the properties currently for sale in the Chandler real estate market are under contract, a 9% point increase since November 2008.  More striking is that 5 points of that improvement has taken place within the last 30 days.

Put another way, for every 10 homes on the market, there are now 2 ½ buyers vs. 2 buyers a month ago.

Comparing against prior years, Chandler’s performance is surpassing that seen in the 2006-2008 period though still less than that seen in the 2003-2005 period.


As mentioned earlier, buyers are being spurred on by three major factors.  First, Chandler home prices have declined to such an extent that the prices are attracting attention.  Second, interest rates are at historical lows with borrowers attaining loans with as little as a 4-5% interest rate.  Third, “first-time homebuyers” who are eligible receive a $8,000 tax credit for purchasing a home.  This money does not have to be repaid unlike the previous homebuyer tax credit program.

The improvement in buyer demand is working to reduce existing inventory as more buyers are stepping up to purchase Chandler homes.


Sales of Chandler Homes Increasing

Chandler home sales activity is beginning to show greater strength in sales over 2008 trends as the number of homes under contract for purchase rises.  In the last 30 days, sales activity has begun to separate more clearly away from 2008 levels.  It is important to note that 2008 appears as the low point for closed sales activity in Chandler.

Given the pending home sales performance mentioned above, we should expect to see the number of actual closed sales increase over the coming 1-3 months.  Indicators are that Chandler real estate will post stronger numbers than that seen in 2008.


Chandler Foreclosures & Short Sales

Chandler, like many Valley communities, has been beset by foreclosures and short sales which have forced prices down aggressively from market highs.


Valleywide, the number of foreclosures do represent a trouble spot for the Chandler real estate market.  Indeed, the 90-day rolling average for the number of Trustee’s Sale notices issued daily continues to grow with over 300 notices given per day.  As well, the number of actual Trustee’s Sale or foreclosure auction proceedings per day is growing and represents approximately 140 foreclosures daily.  Together, these figures point to an increased number of foreclosed homes entering the marketplace in the near term, potentially driving down pricing for existing homes.


Chandler Real Estate Outlook

Overall, the Chandler real estate market is clearly experiencing improvement.
In the next 1-3 months, we should hope to see additional erosion of available Chandler homes inventory given buyer demand.  Though we could see a steady sloping of pending sales activity as the year progresses, the trend should maintain a higher level than that seen in the last two to three year period.  Actual 2009 Chandler home sales should post better results going forward for Chandler than that seen in 2008.


In summary, Chandler real estate appears to be shoring up and laying a more solid foundation for further improvement resulting in reduced inventory, higher pending sales activity, and higher home sales.  Though more foreclosures loom in the marketplace, the outlook for the Chandler real estate market is more promising for the moment.  Time will tell.


About David Lorti


David Lorti is a professional Realtor for Thompson’s Realty in the Phoenix Real Estate Market market. He holds a MBA and Certified Negotiation Expert designation and his insights have been quoted in numerous news outlets. His website, LortiHomesArizona.com, and blog, LortiHomesBlog.com, offer additional market insights on Ahwatukee Real Estate, Chandler Real Estate, Gilbert Real Estate, and all parts of the Phoenix area.

Phoenix Real Estate Auctions – Buyer Beware February 12, 2009

Posted by mkuhbock in Arizona Vacation Property, Uncategorized.
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4 comments

I recently found this blog and the author did a nice job on explaining the different types of residential real estate auctions in Phoenix.

The article can be found here, http://www.transworldnews.com/NewsStory.aspx?id=76055&cat=1

Enjoy,

Michael

Phoenix Real Estate Auctions – Buyer Beware

Home buyers and Investors in the Phoenix Real Estate Market Need to Be Thoroughly Prepared Before Bidding on Properties at Real Estate Auctions

Phoenix, Arizona 2/11/2009 03:13 PM GMT (TransWorldNews)

With the upcoming real estate auctions by US Home Auction, Zetabid and other real estate auctioneers, it is critical for home buyers and investors in the Phoenix real estate market to be armed with property information and prepared for how the auction process works. That’s not to say that deals can’t be had at the real estate auctions because they can for the savvy buyer. But real estate auctions can be both exhilarating, frustrating, and costly for the uneducated buyer. In addition, a buyer’s focus only on auctions to purchase a property can blind them to opportunities for properties on the open market.

The Types of Auctions

It’s important to understand that the Phoenix foreclosed home auctions are just one type of “auction” the Phoenix real estate market sees. Here are a few types to help understand the differences between auctions and the nature of the foreclosed home auctions put on by companies like US Home Auction, Zetabid, and others.

Trustee’s Sale

The Trustee’s Sale represents the true foreclosure auction as this is the legal process by which the primary lienholder (who is owed on the property and pursuing retribution) is foreclosing on the home and will take permanent and legal possession of the property. At the judicial foreclosure or Trustee’s Sale (this is more likely to be the chosen process), other parties have the opportunity to bid on the property but in many instances, the primary lienholder (lender) is the party to take final possession of the home.

Investors and home buyers who want to take advantage of the fact that properties can be obtained at a substantial discount to anything on the market will need to be prepared to pay with cash. As a result, most home buyers are not able to take advantage of these types of auctions. Note: Some investors are purchasing these properties at the Trustee’s Sale, putting a small amount of money into reconditioning the property for resale, and then putting the properties back on the open market and selling at a substantial profit – this isn’t an approach for every investor though.

The “Marketing Auction”

For lack of any better term here, “Marketing Auctions” are where an auction company is tries to auction properties that are currently on the open market for sale through a Realtor by getting home sellers to sign up. Home sellers who have their properties auctioned can cost the home seller anywhere from $1,000 to $3,000 with no guarantee of successful close. In this type of auction, the properties are likely not distressed in terms of foreclosure or short sale. In effect, this type of auction is an expensive marketing tool to raise awareness and potentially find a buyer for a home.

Phoenix Bank Owned or Foreclosed Home Auction

This is the most visible auction type as tremendous amounts of money is being spent on marketing this type of auction here within the Phoenix real estate market. Particulary, US Home Auction or REDC and Zetabid are companies facilitating these auctions. What is different is that the companies are contracting out with the lenders and banks that have a significant number of property assets that they have acquired through foreclosure and want to liquidate as quickly as possible.

Some Items to be Aware of with the Upcoming Phoenix Real Estate Auction by REDC or US Home Auction

1. There is a “reserve price” for the properties. In other words, even though the starting bid price might be $20,000 on a $70,000 (list price) property and your $25,000 bid is the winning bid, if your bid didn’t meet the reserve price of $55,000, you likely don’t get the property unless the Seller agrees anywayt and the property may be put out for bid again. Unfortunately, the reserve price is not disclosed to the public so there is no way of knowing what the real minimum price might be.
2. The sale is subject to approval by the seller. If the seller is not satisfied with your winning bid, the seller can simply decline the sale.
3. US Home Auction or REDC charges a “Buyer’s Premium” of 5%. So, if your bid is the winning bid at $200,000, you can expect to pay US Home Auction an additional $10,000 which is added to the sale price. Make sure to factor this in to your calculations.
4. You are required to bring a $5,000 cashier’s check to the auction in order to be authorized to bid on properties.
5. When buying a property, you will be required to provide 5% of the total sale price (your high bid price + the 5% Buyer’s Premium). The initial $5,000 cashier’s check can be supplemented by a personal check. All of this is due upon completion of a signed purchase agreement by both parties. Once the deal is final, you likely don’t get this back should you somehow back out of the transaction. However, if the property is currently occupied, the contract does allow for a 7 day inspection period within which the buyer does have an opportunity to cancel the agreement at no penalty.
6. IMPORTANT: The Auctioneer can place bids on the behalf of the Seller. This may be done to ensure a property does meet the reserve price. Whether this will happen during this auction or not is difficult to know but something to be aware of when watching the proceedings. I did not see an FAQ addressing this question on their main site. Here is the clause at USHomeAuction.com which I only found by Googling for Terms and Conditions. “The Auctioneer may open bidding on any Property by placing a bid on behalf of the Seller. The Auctioneer may further bid on behalf of the Seller, up to the amount of the Reserve Price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders.”
7. You will be required to close no later than 21 days after the auction unless otherwise extended.
8. Make sure to read REDC’s Terms and Conditions thoroughly. Google “REDC terms and conditions” to see this information for US Home Auction.

Some Items to be Aware of with the Upcoming Phoenix Real Estate Auction by Zetabid

1. There is a “reserve price” for the properties. In other words, even though the starting bid price might be $20,000 on a $70,000 (list price) property and your $25,000 bid is the winning bid, if your bid didn’t meet the reserve price of $55,000, you likely don’t get the property unless the Seller agrees anywayt and the property may be put out for bid again. Unfortunately, the reserve price is not disclosed to the public so there is no way of knowing what the real minimum price might be.
2. The sale is subject to approval by the seller. If the seller is not satisfied with your winning bid, the seller can simply decline the sale.
3. Zetabid charges a “Buyer’s Premium” of 5%. So, if your bid is the winning bid at $200,000, you can expect to pay Zetabid an additional $10,000 which is added to the sale price. Make sure to factor this in to your calculations.
4. You are required to bring a $5,000 cashier’s check to the auction in order to be authorized to bid on properties.
5. When buying a property, you will be required to provide 5% of the total sale price (your high bid price + the 5% Buyer’s Premium). The initial $5,000 cashier’s check can be supplemented by a personal check. All of this is due upon completion of a signed purchase agreement by both parties. Once the deal is final, you likley don’t get this back should you somehow back out of the transaction. However, if the property is currently occupied, the contract does allow for a 7 day inspection period within which the buyer does have an opportunity to cancel the agreement at no penalty.
6. IMPORTANT: The Auctioneer can place bids on the behalf of the Seller. This may be done to ensure a property does meet the reserve price. Whether this will happen during this auction or not is difficult to know but something to be aware of when watching the proceedings. Buried in Zetabid’s Terms & Conditions is this one sentence comment. I did not see an FAQ addressing this question on their main site. “The Auctioneer reserves the right to place bids on behalf of the Seller.”
7. You will be required to close no later than 30 days after the auction unless otherwise extended.
8. Make sure to read Zetabid’s Terms & Conditions thoroughly. You can find these on the individual home listing pages on their website.

Critical Tips

* If you are seriously looking at buying a property through the foreclosed home auctions and have not had a Realtor search and show you other bank owned properties on the open market, you are making a mistake in excluding them from consideration. The auctions are not the only potential source for great deals and there are simply great bargains out there already listed for sale. To exclude these from consideration may mean that you are ignoring opportunities that are even more compelling. Be diligent and research all your home purchase options.
* Visit the properties you are interested in before the auction and have qualified professionals with you to inspect the property for issues. This would include a contractor for any repair and remodeling work you would have done.
* Conduct thorough analysis of comparable properties to ascertain the possible value for the homes you are interested in. A Realtor can help you do this.
* Come to the auction prepared with your estimates as to what you want to pay for a foreclosed home. If you haven’t done this, don’t bid on the property.
* At the foreclosed home auction, if the bid price exceeds your estimates for what you want to pay for the property, walk away and let the property go. Be firm with your estimates regardless of what the crowds may be doing during the bidding process.
* Look online to see the bidding order or call ahead. You could be at the auction all day if you don’t know when the house you are interested in is to be auctioned. Save yourself the hassle by checking ahead.
* On auction day, go a little earlier than the scheduled time for your particular property of interest in order to have time to sit down and watch how the process works.
* Finally, if you are at all unsure about your buying a home through the auction, then don’t follow through. Whether it is a resale property on the open market, a new build, or an auctioned property, do not purchase a home if you feel you may have buyer remorse. Be confident that you are getting the right property at the right value based on your needs and objectives.

Summary

Buyers considering purchasing personal or investment homes at a foreclosed home auction in the Phoenix and Valley real estate market need to understand that the auctions (except the Trustee’s Sale) really represent a distribution method for the lenders to liquidate properties. There very well may be deals to be had at these auctions but the buyer needs to be fully aware of the value of a property or properties that he or she is going to bid on. As well, the buyer should be aware of what other opportunities exist for deals outside of the auction process. Only with all of this information and awareness can the home buyer really ascertain the value of a given home at the home auction and what they should pay for it.

About David Lorti
David Lorti is a professional Realtor for RE/MAX Elite in the Phoenix Real Estate market. He holds a MBA and Certified Negotiation Expert designation and his insights have been quoted in numerous news outlets. His website, LortiHomesArizona.com, and blog, LortiHomesBlog.com, offer additional market insights on Phoenix Arizona Homes. Visit his site for an even more detailed review of Phoenix foreclosed home auctions.

david@lortihomesarizona.com
http://www.lortihomesblog.com