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Gary and Shannon Kiernan's Blog

By Gary Kiernan | Agent in Anthem, AZ
  • Banks Hit Bottom. Keep Digging.

    Posted Under: Home Buying in Phoenix, Home Selling in Phoenix, Foreclosure in Phoenix  |  April 16, 2011 3:56 PM  |  1,832 views  |  No comments

    Part of the fun of being a Realtor is that you are required to attend 24 hours of continuing education in every two year period. The categories covered include legal matters, fair housing and ethics among various others. Some of the presenters on these topics can be quite dry (not always their fault) while others can make almost any subject entertaining. No mean feat when each class is 3 hours long, by law.
    Therefore, like many other Realtors I am sure, I have a small group of "favored" instructors whose classes I am happy to take. One such class occurred just last week. As a Realtor, it is sometimes interesting to get together with other agents to share stories, both good and bad, about the real estate market in general. That day was no exception.
    It began with a pet peeve of mine, and one about which I have posted previously, which is being forced to pre-qualify with "preferred" lenders on REO properties. This led to a general diatribe against the inefficiencies of most banks dealing with both short sales and their own inventory.
    We heard of banks foreclosing on properties on the day before a scheduled short sale that had been approved by their mitigation dept. with full knowledge of that fact. We heard of some banks in that situation that then re-listed the property at a price that was lower than the approved short sale price. Shareholders, are you listening?
    The best tale was a doosy! The buyer was negotiating an REO purchase with a bank. The buyer kept submitting ever lower counter-offers to the bank until they finally accepted the lowest price. Apparently, they thought the market was crashing around their ears. Too funny!
    Remember, these banks are desperate to take over the real estate business, particularly the listing side. Yet, many seem to struggle with just their core business of managing loans.
    I say be careful what you wish for. If banks continue to dump homes (thereby lowering prices across the board) they may indeed end up owning the whole real estate market, inventory included. Of course, at that time it will all be worthless, so they will be welcome to it.
    What say you?

  • Does It Really Have To Be This Hard?

    Posted Under: Home Buying in Phoenix, Home Selling in Phoenix, Foreclosure in Phoenix  |  March 3, 2011 8:29 AM  |  1,859 views  |  No comments

    As any Realtor will tell you, there are times when this profession can really wear you down. Times when you wonder why you bother. Truthfully, I am sure most jobs are like this, but then we remember why we decided to sell real estate, or whatever it is you do, and the moment passes.
    In this vein, and considering the many hurdles that face both seller and buyer in these troubling and difficult times, I have to ask? Why do we have to make this more difficult than it already is, or than it needs to be?
    I came across a listing in the MLS that seemed to be a good match for one of my out of state clients. Good location. Perfect size. And a pretty decent price. And then: there it was. Like a turd in a swimming pool. Hidden away in the private Realtor remarks, "Tenant has first right of refusal." What? So you want my client and I to view your property, go to the trouble of writing an offer in the vain hope that the tenant won't exercise his right and steal the property away from us. If he wants to buy it, then just buy it! Does it have to be this hard? Oh yes, and all for 2 1/2% commission. I wish you luck.
    Also, and I've mentioned this before. I despise the must-pre-qualify-with-my-lender for an offer to be valid listing. Guess what? All my buyers are pre-APPROVED not pre-qualified. In essence, you are saying that you do not really trust our lender, but you insist that we provide sensitive personal info to a lender that you alone deem trustworthy. Better yet; you want us to cough up this info in Phoenix the identity-theft capital of the U.S.A. What could possibly go wrong? "But," they bleat, "The Bank that owns it insists upon it..." they would. Then again, they're the idiots mostly responsible for this mess in the first place. Avoid such listings like the plague and they will eventually figure it out. Or not!
    Finally, an increasing amount of short sale listings require that the potential buyer be on the hook for attorney's fees for "handling" the transaction. Here's a hint. If you are unable to negotiate a short sale as a licensee, don't take the listing. Let's keep the parasites out of our business.
    It really doesn't have to be this hard.
  • Market Correct Pricing Is Crucial, And Always Has Been

    Posted Under: Market Conditions in Phoenix, Home Selling in Phoenix  |  January 25, 2011 10:36 AM  |  1,739 views  |  No comments

    Now, perhaps more than ever, a sensible approach to pricing is imperative in today's difficult market. With more restrictions on appraisers keeping a tight rein on their work, it is important that both buyers and sellers are reasonable in their expectations.
    Some weeks back I received a phone call from a gentleman whose home was currently listed by a friend (not always the best situation, in my opinion.) "Why," he wondered, "is my house not selling?" A quick search revealed the truth. His home was a plain Jane, builder-basic Formica and vinyl house in a large sub-division. There were many other homes with updated kitchens, granite counter-tops and top quality flooring on the market. He was asking $269,000 even though a near neighbor with a much nicer home was listed at $249,000. The only fix was to lower the price to a point where a potential buyer could perform the upgrades and be rewarded financially for doing so. He thanked me and I noted that a week later he had reduced the price. To $264,000! Clearly, he did not get it and his friend was not helping him. A month later, however, I noted that he had lowered it to $225,000 and now it was in escrow. A bit of a slow learner, but he got it in the end. You're welcome.
    In a similar vein I got to talking real estate with a gentleman whilst on a hike recently, after he discovered I was a licensee. We were discussing recent sales on a particular street, one of which I participated in, at prices that were close to one million dollars. He opined that to him they were only "worth" half a million. To back it up he trotted out the old saw that something is only worth what someone will pay for it. Sure, except that people were paying those prices in many cases. I tried to explain that more accurately something is worth what the "market" would pay for it, not what a misguided individual my want to pay for it. It all fell on deaf ears. He then went on to say he thought that it was a good time to build his own home (???). However, he was having trouble, even in this down-economy, finding a contractor willing to discount his services enough to satisfy his needs. I wonder why.
    Ultimately, I walked away and, unusually for me, decided not to offer him my business card. I have worked with difficult folks in the past, but as Ron White memorably stated, "You can't fix stupid!"
  • Real Estate Predictions for 2011

    Posted Under: Home Buying in Phoenix, Home Selling in Phoenix  |  January 11, 2011 8:50 AM  |  1,778 views  |  No comments

    Well it's going to be a question of good news and bad news, depending on which side of the fence you stand: buyer or seller. 

    If you are a seller, I expect that prices in the Phoenix metropolitan area will remain flat, with a possibility of some areas losing another 10% in value.  This is because we are not done with distressed properties.  In fact, Bank of America's recent moratorium on foreclosures, since expired,  only served to kick that can down the road.  Add in the fact that the state of Arizona is suing them, and you can deduce that 2011 will also be a rocky year.

    At this point I must add, and I have said this before, that the banks are also their own worst enemy.  Their languid responses to short sales, (anywhere from two to twelve months) is costing sales and delaying the possibility of a return to a normal market; whatever that will mean in the future.  Their utter disdain for the conventions and customs of the real estate market is certainly not winning them any friends among the ranks of real estate professionals.  So, keep offering insulting commission rates for what are arguably more difficult transactions and see the caliber of agent you will attract.  Keep insisting that potential buyers MUST pre-qualify with your Aunt's second cousin at Billy-Bob's Ammo, Pizza and Mortgage Emporium.  Let me know how it all works out for you.  Many real estate pros have long memories so your future will not be bright.

    I think the main problem with the banks, due to their corporate culture, is that few of the people tasked to approve a short sale have the stones to actually sign off on that loss.  Too often they are scrambling for excuses to kick it upstairs, or off to another lackey, so as to avoid responsibility for any decision-making.  This further exacerbates the problem.

    On the positive side, it won't be a bad year for buyers, price-wise at least.  For those who saw prices sky-rocket in '05 and '06 and who thought that the dream of home-ownership had died for ever, the reprieve has been extended.  It will be a demanding and possibly fraught experience due to the above-mentioned reasons, and the cautiousness, understandably, of the appraisal community.  However, for those buyers with a steady job and a good credit score there will be some good deals to be had. 

    Here's hoping that everyone enjoys a happy, prosperous and most importantly, a healthy 2011.

  • A Disturbing Sign of the Times

    Posted Under: Home Selling in Phoenix  |  June 1, 2010 8:04 AM  |  344 views  |  1 comment
    There is an old adage regarding the "Golden Rule". Them with the gold, get to make the rule. We had an irritating example of this just last month. We had listed a property for our client and it had sold within days for full price, which in and of itself was quite a shock. We later discovered that the buyers had coveted the home years before so that when it came on the market they just snapped it up. Even though they were going with a large down payment, we still felt an appraisal at full price might be a stretch in this market, and advised our seller accordingly.

    In the meantime, our seller also had a second shot at what he considered his dream home when a short sale that had dragged on for almost a year suddenly became available. Our offer was accepted, but it was contingent on the first sale. The appraisal came in at the desired price of $545,000 and it looked like two families were going to get their dream homes. Who was it who said "I love it when a plan comes together"?

    Then, the waste product came into direct contact with the oscillating, rotating air-moving device. The day before drawing docs on the first sale, a loan processor arbitrarily and capriciously decided it did not like the appraisal. It then ordered a drive-by appraisal which came in at $470,000! The original appraiser was mortified by this lack of respect for her work and requested the opportunity to defend herself. This was duly granted. In the meantime, the processor ordered another drive-by, and this one came in at $400,000! Nobody told me there'd be days like these!

    In the end, they completely ignored the official appraisal and said they would stick with the drive-by evaluation of $470,000. Everybody said "They can't do that!" But they did. Luckily, both buyer and seller were willing, and financially able, to reach a compromise. The seller came down $25,000 and the buyer was able to come up with the extra cash, so it closed, albeit a couple of days late.

    Interestingly, when we came to an agreement with the bank on the short sale we were buying, they gave us 10 days to close it. This, after they had messed around the previous buyers for more than 9 months. The stones on these people. We closed it in 9 days. That night, Mrs K and I went out for frozen yogurt. It was good.
  • Pending Sales Are Up In Phoenix

    Posted Under: Home Selling in Phoenix  |  April 9, 2009 9:17 AM  |  282 views  |  1 comment
    A rise in pending transactions bodes well for the future of real estate in the Phoenix metropolitan area.

    As we have noted in the past, the free-market, when it is allowed to operate always has and always will re-dress the housing market. You may not like the way in which it is achieved, but it will occur naturally, if left to regular market forces. By this, I mean that well intentioned programs to enable folks to stay in homes they still cannot afford, only delays the inevitable.

    Twice in recent memory, November 2008 and March 2009, prices have dropped so drastically, partly due to foreclosures and partly due to the economy, that sales have leapt up. Many people who thought they had missed the boat are now stepping up and finding that there are many bargains to be had.

    Analysts use many benchmarks to gauge the health of the real estate market-pending sales is one of them. A pending sale is classified as one that has an executed contract, with an agreed price, has been taken off the "active" market, and is going through the regular processes prior to closing.

    The Cromford report compiles such statistics and shows that in March 2009, pendings were up over March 2008 virtually across the board, with the exception of Anthem and Paradise Valley. The latter probably due to the high cost of homes and the tendency for the wealthier to be able to ride out bad economic times and stay put. The former, Anthem was down a little, but from a statistical standpoint of just one month, may merely be a hiccough.

    One minor nitpick with the report is the figures for Cave Creek, which show 45 pendings versus 32 for March last year. Anybody with a working knowledge of Cave Creek would know that 45 is an absurdly high number for such a small town, as was the 32. the compiler of the report makes the same mistake that many "analysts" make. By dint of post office fiat, Cave Creek shares a zip code (85331) with a large portion of North Phoenix. This radically distorts the figures. I complained when the number of foreclosures reported in Cave Creek, which is detrimental to the community, were mis-reported; so in the interest of remaining fair, I must complain when it inflates the re-sale activity as well.

    Other than that, things are slowly beginning to recover, so long as government doesn't stop by to "help" again.
  • Pricing Is Key; Always Was, Still Is.

    Posted Under: Home Selling in Phoenix  |  April 2, 2009 12:51 PM  |  299 views  |  1 comment
    Pricing your home to sell is always a main factor in marketing your home. The sagging Phoenix real estate market makes it vital.
    The old adage in selling real estate was always, "Location, location, location". While that still holds true to a large extent, there are other factors just as crucial, not least of which is - Price.

    I was reminded of this again, today, as I was sifting through the MLS. Time after time, the same old frequent flyers kept popping up. Homes that were $550K two years ago when they should have been $500K, now marked down to $400K, when they should be $350K. Always a day late and a dollar short, as the expression goes. You have to price into a falling market, not reflexively reducing to imitate local sales after they have closed. In the above example, had the seller started at a realistic $450-$475K two years ago, it would have sold. Now the selling price will likely be $100K less than that.

    It is sometimes too easy to blame the seller, when many times it is the fault of a weak agent. Someone who has not worked through tough times may not have developed the skills needed to persuade a recalcitrant seller to lower their price. Or indeed, may not have developed the confidence to walk away from, or decline in the first place, an over-priced property. All Realtors say they need listings; what they really need are saleable listings. Big difference.
    As a home seller you need to speak to your prospective agent in order to satisfy yourself that he/she is capable of getting the job done.

    Then we have homes that have been around so long, that the sellers are now upside-down, and owe more than it is worth. Often, this is as a result of re-financing to release equity. In retrospect, not a good idea, at all. These "short sale" homes are often priced temptingly low, in order to hook a buyer with which to begin the process. For a serious buyer, this can be a frustrating experience. Be wary of the short sale that is under-priced, it may disappoint you. Given the choice, I would go for the bank-owned, or real live actual motivated seller, if I were able.
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