Christoph

The discount thresholds that banks use in determining their required net in a Short Sale is based on the current market value of the property and the type of loan that is being shorted. As a general rule of thumb lenders will accept a net of 85-92% of current market value if it is a conventional loan. 82% if it is FHA insured loan and around 88-91% if its a VA guaranteed loan. Keep in mind that real estate commissions and closing costs have to be added back to that.

If the listing agent has experience chances of a short sale closing are actually pretty good. Unfortunately, in my experience it happens a lot that buyer's agents are steering buyers away from Short Sale listings because of the long approval process (usually anywhere from 45 to 60 days) and the uncertainties whether the transaction will get approved or not. In some cases this could be a disservice to buyers, especially if the buyers are not time pressed to purchase a home. Many times, short sale listings are better maintained because the sellers still have sense of responsibility and with to cooperate with their debtors to avoid foreclosure.

Just to give you an idea on what kind of spreads banks are shorting: I just got a short sale approved where the bank accepted a sale price of $220,000 on a property which was mortgaged to $316,000 in 2005. This is over $109,200.00 loss to the bank.

No, short sales are not a slam-dunk by all means, however banks have gotten wiser and if the property is priced correctly and the agents involved have a clue what they are doing then you have a good shot closing it.

Christoph K. Schweiger
Associate Broker
Homesmart
602-325-3415 - Tue Sep 16 2008, 22:19

Hello Rose,

In Arizona there are generally four ways to take title to real property:

1) Community Property

2) Joint Tenancy with right of survivorship (owners need not be married, and there can be multiple parties)

3) Community Property with right of survivorship (this requires a legal marriage between the two owners)

4) Tenancy in Common, owners need not be married, and there can be multiple parties

It sounds like that Joint Tenancy with right of survivorship or Tenancy in common may be your best option. With Joint Tenancy with right of survivorship all owners hold an equal interest with Tenancy in common each owner holds an undivided fractional interest (e. g. owner A owns 17% and owner B owns 83% of the property).

I recommend to consult with an attorney before deciding on how to hold legal title. This would also be a good time to create a will in case you have not done that yet.

Hopefully that helps!

Christoph K. Schweiger
Associate Broker
Homesmart - Wed Aug 27 2008, 20:15

Hello David,

Let me try and answer your two questions:

With the current market conditions in mind, the most important consideration when buying investment property is location. Yes there is the cliché’ saying “Location, Location, Location” but if your hold period is only between two to three years then it is utmost important making a careful choice about the geographic location of your investment properties to minimize the risk of potential depreciation. The Phoenix Metropolitan Area is a very large geographic are and the newly master planned communities in the outskirts have been hit the hardest.

If I was to buy a single-family investment property then I would probably stick to the matured areas. A good example would be in and around Old Town Scottsdale, Tempe near the ASU campus, Down Town Phoenix and along the new Light Rail corridor.

As a general rule of thumb, right now you probably would be hard pressed to break-even cash flow with 20% down payment on single-family properties. With your intention of holding your rental for such a short term my advice would be to carefully consider all your options. I don’t have a crystal ball, however I have a feeling that the market has not quite bottomed out yet and once we made it through the valley we will probably return to normal appreciation rates. Yes we are in a down market, and nobody can perfectly time the bottom, but my best guess is that investing in rental properties requires a longer hold-strategy than two to three years.

Finding tenants is not the problem, finding good tenants, that generally in where the bigger challenge lays. The fact that population growth still going strong here and the more stringent down payment requirements for mortgages loans is putting generally a more positive outlook on the rental market.

Investment considerations are very important when buying a house to live in. However when buying a primary residence you should put your individual housing needs before the investment strategy or speculation. If the values remain flat, or are a little worse by the time you are selling then you should have at least enjoyed living in your home.

Feel free to check the market conditions of the Phoenix Are on my blog. The Altos research charts are broken down to most of the ZIP codes in the Phoenix area and may give you closer look on the local market conditions.

Hope my two cents will help along in planning your next move.

All the best and Good Luck! - Thu May 22 2008, 22:27

Hey Steve,

My blog is at http://www.christophschweiger.com and is occasionally updated as long as I am not suffering from writer's block. I believe we crossed path in Dave's lab. You are now on my roll... - Wed Nov 28 2007, 16:36