Questions You Might Ask About AZ Homebuying
Q: Aren’t pre-foreclosures and foreclosures better buys than houses on the Arizona Multiple Listing Service?
A: Many of the houses listed in the MLS are either pre-foreclosure or post-foreclosure listings. They have a foreclosure date set (what we call a Trustee’s Sale in Arizona) or they are bank owned after being foreclosed on. To figure out which is which, find the “Special Listing Conditions” box on the front page of the listings I send you. This screenshot below will show where to find it on the page.
Listing agents are required to indicate if a listing is a Short Sale/Approval Required or Lender Owned. As for foreclosures, only a small percentage of homes are actually bought by third parties at a Trustee’s Sale on the courthouse steps. Most return to the bank, which puts the homes back on the market—sometimes at remarkably low prices. Sometimes at prices that are too high. Just because a home is bank owned does not mean it’s a good deal.
Q: Why do you caution people about buying foreclosed properties on the courthouse steps?
A: The main reason not to buy a home at a Trustee’s Sale is you will not know exactly what you are getting. You have no access to the home before you pay for it. You have no inspections to warn you of money-pit issues that will make it a bad investment. And you don’t know what the people who were foreclosed on did to the property to get back at the bank. Some people have purchased foreclosures and discovered the exiting owners poured concrete down all the plumbing pipes. A very expensive fix. And the buyer is the one doing the fixing.
And because there is no title search before buying, as in a traditional sale, which checks for clear title and outstanding liens against the property, nasty surprises often crop up after a Trustee’s Sale. You bought those along with the property. Title companies can do preliminary searches, but there is no guarantee there aren’t unknown title issues lurking that haven’t caught up to the situation.
One more reason: The folks who frequent the courthouse steps with big checks in their pockets often act like a cartel. They don’t cotton to newbies cutting in on their action and may outbid you just to discourage you. If you insist on wading into these shark-infested waters, consider getting in touch with one of the less lethal sharks who will charge you a small vig to do your bidding (and bat the other sharks away).
Q: What’s a Short Sale?
A: In a short sale the sellers put their house on the market for less than they owe on the mortgage. When an offer is made that they accept (in principal), there is an addendum to the contract that says the sale is contingent on the seller and their bank agreeing not only to the deal, but to the financial consequences the seller may or may not face by not paying the debt in full. It’s the bank who is calling the shots.
Sounds like an opportunity, right? Except that many agents put houses on the market and advertise them as “short sales” without having communicated with the bank to get them on board. It will take, on average, 60-90 days for a bank to respond to a submitted offer. That’s two to three months where the only thing a buyer hears is the sound of crickets.
So why pursue a short sale? To cut out the competition. Cash-toting investors are tripping over each other to snap up rental properties in the under $150,000 price range. They need to find it, fix it and rent it while prices are still amazingly low. They aren’t going to want to wait 4 months to get their money working for them. Few people have the schedule or the patience to wait months from the time they write a contract to the day they are handed the keys.
On the day I write this my clients are opening the door to their first home, which they purchased via a short sale. They got a great deal and the selling bank generously agreed to our request for $5,000 in closing cost contributions, but they are taking possession exactly 4 months from the day they signed their offer. Their patience paid off.
Q: Who is the most important player in a Short Sale?
A: After you, the person bringing your money to the table, the most important player is the listing agent. Why? Short sales have been called the “brain surgery” of real estate. A listing agent, or their negotiating partner, if they turn it over to a pro, needs to know the ins and outs of negotiating with a bank and have experience in getting deals done. They are the only party authorized by the seller to talk to the bank on the seller’s behalf.
How can you tell which listers have a good grasp of the process? It’s your agent’s job to find out the level of skill on the other side of the table—before you make an offer. A simple phone call and a few key questions will reveal whether or not the listing agent is skilled at short sales. After talking with the listing agent, your agent should share what she learns and discuss your chances of reaching a successful close.
Q: This is confusing. Which kind of purchase is best for me?
A: You probably aren’t confused, but I couldn’t resist encouraging you to call me. Short sales are great for some buyers and a terrible idea for others. Deals on bank-owned homes will be right for some buyers and difficult for others to compete for. It’s all about what is best for you. I would be happy to learn about your circumstance and offer my thoughts. Because no matter which way you go, we’re going to find you a deal. Find me at 480-241-0241.
