Tucson Kent's World

Buyers often ask me "Can I put in a really low offer on this house?"  The short, simple answer to that is that anyone can offer whatever they wish on a property.  What really matters is if the offer will be looked at...and even considered.  A few times I've had clients who really, really liked a particular home, but ended up heartbroken because, in their attempt to "get a steal" because "it's a buyer's market," they either poisoned the seller against them or wasted time in a competitive foreclosure market by offering w-a-a-y below asking price.

Lets take a look at a typical scenario:

Buyer A is approved for a loan that will allow them to buy a home priced up to $200,000.  The question comes up about the possibility of offering say $200,000 on a property priced at $225,000 (which is a 12.5% discount).

There's absolutely nothing wrong with offering that, if comparable properties in the area are going for the lower price.

In reality, chances are, that offer won't even get a response. Generally speaking in the Tucson market, prices being asked nowadays are fairly close to what the market is bringing. If the seller is asking more than what the market is showing, you can just about guarantee that asking for a discount like this is going to be met with rejection instead of a counter-offer back. If it is a bank-owned house, you don't have to deal with the "human factor" i.e. "ego" like you would with one that is owned by a human being - there's nobody that would take personal offense or get cranky about a "lowball" offer - but they have their bottom line too, and a rejection is a rejection.

In the Tucson real estate market of today, many bank-owned homes (aka REO, foreclosure) are underpriced and seeing multiple offers in the first week or two.  Taking the time to submit a lowball offer and wait for a response can often be an exercise in futility - with a more realistic offer (many times OVER the asking price, but within comparables for the area) snapping it up before another offer can be made.

Most often, a home priced above market IS owned by a real-live person who is still attached to their property emotionally, and either can't or won't face the reality of the marketplace. Many times, the home will have been sitting on the market quite a while (DOM or, Days On Market), and will probably remain there for quite a while until the seller either takes it off of the market or comes to grips with it & eventually lowers the price.

If you see a home that is priced at $225,000 and want to offer $200,000 on it - I have no problem putting together the offer...just realize that the likelihood of positive results are close to nil in today's market. We could get lucky, just don't count on it!

Something else to factor into an offer is whether you want the seller to help pay your "closing costs" which generally run about 3% of the purchase price ($6000 on a $200,000 home). Typically, sellers in today's market are willing to help out that way, but not with a large discount on the asking price included...it is like asking them for 2 discounts at the same time - similar to showing up at a resort offering "Locals Only Summer Rates" and wanting a AAA discount on top of it. You might get one, but not both.

I also work with investors who are market-savvy, looking at capitalization rates, market saturation ratios, historic vacancy rates & projected growth patterns...the principles work the same way:  If the property works for you, and you want it, messing around may cost you a good property.

Smart investors know where the market is & are willing to pay the price because it is right.  Amateurs, blowhards & wannabes "paper the town" with offers looking for "the steal of the decade" while others make money.

So - is it a good time to buy a home in Tucson?  Rip Van Winkle took another nap...for 5 years...see what he found out!

Things have changed dramatically in the Tucson Real Estate Market in the past five years.  Prices have come down considerably, and - get this - interest rates are incredibly low.

The past several years have seen artificially inflated highs, so inflated that the economy of the United States suffered a severe downturn when the "bubble" burst in the Sand States of Arizona, Nevada, California and Florida.  This was a serious contributing factor to the near meltdown on Wall Street - and affecting economies worldwide.

The speculators and "quick buck" artists of the go-go 00's are gone, with first-time homebuyers, people looking for 2nd homes and smart investors finding value in today's no nonsense real estate market.  The days of "picking up a couple of homes for an easy flip" are over, and common sense has come back to the table, at least in the Tucson market.

The average homebuyer can now buy a good home at a good price, with a loan that has a historically good interest rates.  Many "crystal balls" turned out to be cracked & made of cheap plastic in the "oh-oh 00's" but I have a feeling that several years down the road, the market we are in right now will be looked at as one of the best times to buy in a long time.

If you find something of value here, please feel free to share or forward this to your friends and colleagues.  To learn more about Tom Heath & mortgages in Tucson, click here.  To search for properties available in the Tucson real estate market, click here.  To learn more about people & places in the Tucson area, visit our website, THE Tucson Real Estate Show.

Special thanks goes out to Barry Habib for his inspiration in making this video.  The location we used is in the University of Arizona BioSciences Park, now under construction.

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The Tucson Real Estate Show

Friends, readers and anyone interested in Tucson or Real Estate in general - I am proud to be introducing THE Tucson Real Estate Show!  In Episode 1 - we start at a Tucson "Old West" landmark, Trail Dust Town, and ask the question, "Why another real estate show?"  Hopefully you will like the answer:

Tom Heath of Sunstreet Mortgage, current President of the Southern Arizona Mortgage Lenders Association and I will be exploring different areas of Tucson, the people that make "The Old Pueblo" a special place and highlighting local businesses as well as interesting places.  One of our goals is to tie in our wanderings with some helpful information about the Tucson Real Estate Market while providing some consumer education along the way.

We launched our all-video website yesterday (so bear with us while we iron out some of the wrinkles) with our first four episodes.  Each week we will have a new segment for you to enjoy.  Future episodes will include the Historic Tucson Trolley in downtown, the University of Arizona Bio Park, St. Phillip's Plaza Farmers Market & more!

Follow us while we search for the elusive holy grail Mr. An - a longtime Tucson figure for his fine cuisine, love of baseball, and try to wheedle an invitation to the grand opening of his new restaurant in downtown Tucson, An Congress - right along the route of the coming Streetcar.  If you see something of value, please feel free to forward to your friends & colleagues.

Episode 2 - "On The Right Track To A Mortgage"
  - from Tucson's Historic Train Depot

How can Tucson become more "Business Friendly" in one simple step? 

It happened July 8th - by a 7-0 vote, the Tucson City Council decided to do away with the nightmare that obtaining a Certificate of Occupancy for commercial properties had become.  Yippee!!!!  Hooray!!!

A couple of years ago, after learning that less than 25% of all businesses had a valid C of O, a measure was passed in Council to require a new Certificate of Occupancy be issued for any commercial property changing hands.  Whether lease, sale, trade - whatever - to get the permit to open a business' doors, a new C of O had to be issued.

Makes sense, unless you have no workable criteria in place to obtain one.  Oops.  Kinda forgot that part.  The solution was to form a committee of 18 people drawn from the business world, neighborhood associations, public interest groups and other "stakeholders" to come up with an outline of the steps needed to satisfy the requirements.

Problem.

The committee couldn't even agree on when the meetings would be, much less come up with a workable plan!  Meanwhile, there's an ordinance on the books that has no understandable rules to figure out how to comply with.

So...the past 2 years have been a nightmare for business & property owners.  You've got to get a C of O to open the doors, but nobody knows what you have to do to get one.  Okay, we can't just keep every business in town that wants to open up or move into an existing structure from being able to operate, can we?  Solution - we'll just require a C of O for "change of use."

Cool! 

Problem:  change of use was interpreted so strictly that an shoe store couldn't move into a building previously occupied by a dress shop.  "But they're both retail operations," you might say..."But they sell different things," the interpretation was, "so it's a change of use."

(Can you picture how much hair was lost due to pulling out large tufts with both hands?)

The towns of Oro Valley, Marana, Sahuarita and Unincorporated Pima County made out like bandits as frustrated businesses chose to locate there instead of Tucson.  I have no doubt that officials of those entities regularly said (behind closed doors of course), "Thanks for the bonehead move, City of Tucson - we'll be glad to increase our tax base.  Sorry about your budget woes, wonder why we're in the black?  Hmm...snicker, snicker."

But that's all behind us now, isn't it?  Thanks for your July 8 vote to rescind this ordinance, City Council - you're moving in the right direction...please don't do something that stupid again.

Those of you who know me - know that I'm a junkie when it comes to statistical information.  I devour stats like George Will devours baseball history.

One thing I've noticed is that very few market reports make it easy for the consumer to see information on homes that are eligible for FHA and VA loans and which require conventional financing - so I thought I'd try to make it simpler.  In Pima County, Arizona (Tucson), the FHA loan limit is $316,000, so I limited the data to those.

FHA & VA loans have more stringent property condition guidelines, and may require a longer escrow period, so some (not many) sellers don't want offers that use these types of loans.

Here's what is available as of this evening in the Tucson Metro Real Estate Market:
(Including REO Foreclosures & short sales)

To give you an idea of what has sold or come under contract this month so far:

(Active Capa is not counted in these stats, since that term is most often used in short sales & only God knows when or if those will ever close)

*When looking for a home, you want to make sure you know what type of financing you will be using BEFORE you start looking at properties - sometimes you may fall in love with a house that has a seller who isn't in love with your financing, or the property itself doesn't qualify.

**Other factors to consider too - just because a property falls into the price guidelines of your budget doesn't make it eligible for your loan.  The property may need repairs that disallow the property from your type of loan, or require you to get a different variation of that loan i.e. - FHA 203k Streamline & FHA 203k.  In Tucson, most condos on the market are not FHA approved...even if they might say so in the listing.

***Knowing your loan type and its property parameters are CRITICAL to helping make sure you are looking at the right properties.  A good agent will know most of the guidelines already - and keeping good lines of communication open between your loan officer, your agent and you will help make finding you the right property easier & more hassle-free!

With most of the action happening on the lower end of the market in Tucson - the luxury market is still in a slump.
This fact leads to opportunities for buyers looking to take advantage of their strong position and pick up the home of their dreams or make an investment in resort property.

It was the best of times.         It was the worst of times.

(apologies to Dickensian scholars worldwide)

It is a buyer’s market.              It is a seller’s market.

Both statements are true—it all depends on what part of the market you’re looking at. There are some very interesting dynamics at play in the Tucson real estate market this summer—we’ve got 2 markets going at the same time in one city.

On one end of the spectrum, multiple offers and bidding wars are reminding people of the “boom days” of 2005-06, when offers would start pouring in on properties before the “For Sale” sign was in the ground.

At the opposite end of the market, homes are languishing for months and months without much activity while prospective buyers are demanding (and getting) price reductions, repairs, upgrades and other concessions from sellers.

Overall, there are just over 4,000 single family homes on the market today in the immediate Metro Tucson area. Since June 1—just over 2,000 have sold (about 6 weeks). That means that there is roughly 3 months of inventory on the market today, which is a drastic improvement from the year’s supply we had last year.

Here’s where it gets interesting: out of those 4,000 homes on today’s market...950 are priced at $500,000 or more. Only 730 are priced under $150,000. Guess which market segment sold the most homes the past 6 weeks?

Ready? Drum roll please...

         Comfortable & Affordable?                    OR                                  Luxury ?

Out of 2047 homes sold since June first, 762 were under $150,000. Only 114 in the half-million and up range have sold since the beginning of summer. Not too hard to figure out where the action is.

Purchasing a home in Tucson right now is an exercise in different disciplines: in the lower end of the market, things are fast, furious and ultra-competitive while the luxury market is begging buyers to “Pick Me! Pick ME!!!!”

The best part of it all? Bargains are in all areas of the market—you just need to work with someone who understands market dynamics and is adept at identifying the contenders in a sea of pretenders—someone like me.

Below, you can see TucsonKent's Top 10 foreclosures for sale under $300,000 in the Tucson real estate market.  As noted in the previous post, the foreclosure market is the hottest segment in Tucson real estate right now.  With the $8000 tax credit, good interest rates and low prices, first-time homebuyers are seeing great opportunity to achieve the dream of owning a home.  Many times, foreclosure homes are a good buy...if they are in decent shape (always, always, ALWAYS have your homes inspected by licensed, experienced professionals). 

There are quite a few Tucson foreclosures in the $300k and below segment - these are my picks for the Top 10 this week, according to ability to finance, not requiring a lot of obvious repair & to reflect a variety of locations around the Tucson Metro area.

In this segment of the Tucson real estate market, the competition isn't quite as fierce as in the market for foreclosed homes under $150,000...but the smart investors are seeing the opportunities to take advantage of undervalued homes in a down market. We're not seeing quite as many of the foreclosures in the $300k and under price point go through bidding wars, but there are some - especially if the home is in good shape, and priced below comps.