Category Archives: Homeownership

A Second Chance at Homeownership this Holiday Season

I just drove by the house you have for sale on Frost Drive – is it still available?  No, I said.  We put it under contract a few days ago.  The voice on the other end of the line then asked, do you have any others like it for sale?  Unfortunately, we don’t I explained.

The caller’s name was Don Price.  A semi-retired engineer, he moved into his dream home – located in a 55+ community – about three years ago.  Not long after that child protective services showed up at his door with his three grandchildren.  Unable to stay in the neighborhood because of the age restriction he was forced to sell.

And here’s where it gets tough – Don was over $150,000 underwater on his mortgage.  The only option for him was a short sale.

As you probably know even with a stellar credit score a short sale will keep you from buying another house for at least three years.  The FHA, Fannie Mae and Freddie Mac won’t do it.  Don Price knew this too.  So he called me when he saw our sign in front of the house on Frost Drive that said NO QUALIFYING – FORECLOSURE – BANKRUPTCY OK.

I told Don we didn’t have any others for sale in the area but we could probably find him a similar home.  As it turns out I didn’t have to – Don found it for us.  He checked on the internet everyday and drove around the neighborhood looking for new for sale signs.

The house he found was owned by Bank of America.  It had been flooded, presumably by the prior homeowner.  We bought the house by partnering with an investor that had a self-directed IRA, remodeled it and sold it to Don using seller financing.  We closed on Christmas Eve.

There are millions of former homeowners just like Don Price.  Their only mistake was buying a home at the worst possible time in American history.  We recognize that this is a crisis but with crisis comes opportunity.

What I like most about seller financing in this marketplace is that it creates a win-win-win-win.  Don wins because he gets a second chance at homeownership.  Our management team and investor partners win because we get an above average ROI.  Finally, the neighborhoods we buy in win too because we put families into homes that were once an eyesore.

Last month, we posted a video tour of the home we bought for Don Price and his family BEFORE we started the remodel.  Check out the amazing transformation in this video we shot after the rehab was complete.

Happy New Year from Free Real Estate Education!

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It’s Best to Double Dip When No One is Looking

Pringles are the best chips ever made.  That’s what my 7-year old daughter thinks.  And given her vast experience in this area I have no reason to disagree with her.  What chip is best?  We had this discussion recently on our way to pick up her younger sister at pre-school.  She was adamant about Pringles.

What about Ruffles I asked?  Cheetos?  Fritos?  Or my personal favorite, nacho cheese flavored Doritos?  Yes, Pringles are delightful I told her.  But, it seems unfair to compare a snack food that comes in a tube to those that come in a bag.  She didn’t see the difference and remained steadfastly committed to her chip choice.  What can I say?  My daughter does not understand packaging principles.

Do you know what else she doesn’t understand, at least until recently?  Double dipping – whether it’s Dean’s French Onion, Frito’s Bean Dip or your garden variety Ranch dressing – that girl will plunge her chip in over and over again.  She’s improved over the years for sure but it can still be an issue.  I’ve explained to her that double dipping is unhealthy.  No more double dipping I say!  It must stop!

Equally unhealthy and even more disconcerting is all of this talk about a double dip in the real estate market.  Yesterday morning I came across a blurb in the Arizona Republic – Home Prices Expected to Dip

Here we go again.  Another opportunity for the media types to pour fuel on the fire right?  Actually, this time they got it right.  Well, sort of.

For those of you who read my blog on a regular basis you know how much I respect Michael Orr of the Cromford Report.  He’s a housing analyst that, along with his counterpart Tom Ruff of Information Market, studies everything real estate related in the Phoenix metro real estate market.  Together they track Notice of Trustee’s sales, Trustee’s deeds, cancellation of trustee’s sales, normal sales, short sales, REOs, days inventory, contract ratios and more.  I recently took one of Michael’s classes and he predicted there will be no second wave of foreclosures.  But, that’s a topic for another day.

Michael accurately called the bottom of the Phoenix real estate market in April of 2009.  The average price per square foot for a sold home that month was $83.82. The previous low was recorded in 2000.  Since April of 2009, the average price per square foot slowly increased – peaking in May of this year at $91.83.  Last month, the average price per square foot dropped to a new low of $82.49.  It appears as though we have experienced a real estate double dip.  Yuck!

However, if you analyze the data (which I’ll admit can be dreadfully boring) AND factor in the effects the tax credit had on our market, an argument could be made that there was no double dip.  How?  Consider this – since June home prices here have dropped approximately 7%.  The median price in the Phoenix metro area is now hovering around $115,000.  If you do some quick math you’ll find that the median home has dropped in value by about $8,000 since the tax credit expired.  Interesting isn’t it?

So, if you’re not really paying attention it would appear as though we’ve experienced a double dip.  That’s not what really happened.  The home buyer tax credit artificially created a spike this summer and now home prices are going back to where they belong.   My prediction is we’ll see some additional declines because of the holidays but start recovering in the spring.

Now pass the Doritos.  I’ll try to keep my daughter away from the bean dip.

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The Foreclosure Story No One is Talking About

Fear and loathing Marty, fear and loathing…that’s what Vince Gonzalez, the then KPHO news reporter, used to say to me whenever we’d head out of the newsroom on our daily search for the latest victim of wrongdoing.

Vince and I once got into a heated on-camera exchange with the owner of a mortuary.  Evidentially, this guy was cremating people using sub-standard equipment and techniques.  Let’s just say the loved ones of the deceased and the Arizona Department of Environmental Quality were not too happy with this mortician.   So we did what all good local TV news teams do – we ambushed him at this place of business. He nearly punched out Vince and ripped the camera off my shoulder.  Good journalism?  No.  Good TV?  Yes.

Last I heard Vince was a correspondent for the CBS Evening News.  I left the news business in 2002 to embark on a more stable career in real estate.  These days whenever I read or hear a real-estate related news story I remember Vince’s words – fear and loathing.

The news media’s job is to attract the maximum amount of readers/viewers.  More readers/viewers equal more money.  It’s a simple formula that media executives have mastered – scare the crap out of your readers/viewers and they will read/watch your news more often.  That is why at least once a quarter you’ll hear a moronic news reporter saying that the bacteria in your kitchen sink could kill you.

For the past month Bank of America has dominated the headlines.  Their moratorium on foreclosures has created an industry-wide panic.  Retail home buyers and investors have put the brakes on because of all the uncertainty.  The mainstream media loves this stuff.  It’s good for their bottom line but lousy for us real estate investors.

Needless to say, it came as no surprise to me that THE foreclosure story no one is talking about, first announced on October 12th and updated October 20th, is a story no one is talking about.  Why?  The story puts an end to all of the fear, speculation and uncertainty circling “foreclosure-gate.”  The wide reporting of this story would get scared retail buyers and investors back into the real estate market – exactly what we need to continue the recovery.

The Associated Press headline read ‘Fidelity National, Bank of America in Foreclosure Deal’.  You don’t have to read the entire article.  Here’s the deal in one sentence – Fidelity National will continue to issue title insurance on all foreclosed homes and Bank of America will pick up the tab for any potential litigation that could come from cutting corners on paperwork or legal procedures. 

What does that mean if you are a retail buyer or investor?  It means you will get a title insurance policy on that foreclosed home you want to buy.  It means that if the former owner tries to sue, Bank of America will step in and cover all the costs.  You no longer have to worry about giving up that foreclosed home you just bought to the prior homeowner.  This deal removes the cloud of uncertainty that hovers over the huge supply of foreclosed homes. 

That’s good news for retail buyers and investors.  But like I said, news outlets prefer fear and loathing.  It’s like an economist once proclaimed, “If the media was there the day Jesus walked on water next day’s headline would have read JESUS CAN’T SWIM!”

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Facts Tell, Pictures Sell

I know certain things.  For example, I know that I should exercise at least three times a week for 30 minutes.  I know that I should eat a balanced diet of lean protein, fruits and vegetables.  I know I shouldn’t drink soda, smoke cigarettes, or drink alcohol excessively.   I also know I shouldn’t speed on the freeway or talk on my cell phone while driving.  I know I should floss my teeth every night before I go to bed and tell my wife that I love her.  So, if I know and accept these things to be fundamental truths then I must do them religiously and without fail right?  Well, if you’re anything like me then the answer is a big fat no!

Why is that?  Most of us know exactly what we need to do to be successful, from our diet to our fitness.  The trouble is following through.  Some experts believe it’s because as a society we are undisciplined.  That’s part of the reason but not the real answer.  I believe it’s because it’s just too darn easy not to be successful.  The consequences are often unrecognizable and far off in the distant future.

As a Realtor there are things I know in my business too.  I know my listings will seller faster and for more money if they have lots of clean, well-composed, high quality pictures.  I know that potential buyers will most likely find my listing online and will call their Realtor to see it because of the pictures.  The bottom line is that facts tell and pictures sell.  You probably know that too.  But do your listings show it?

I’m not advocating dropping thousands of dollars on expensive camera and lighting equipment, nor am I suggesting you go back to school and study photography.  However, I do recommend you invest about $500 in a digital camera and learn some basic photography techniques like the rule of thirds.

 I recently purchased a Canon G11 digital camera.  Keep in mind I’m no photo geek so I’m not going to bore you with the specs.  What I like about this camera is that it’s high resolution (10 MP), has a built-in wide angle lens (a must for taking pictures of houses) and is excellent in low light.  The Canon G11 is a hybrid between a standard point and shoot and DSLR.  It won’t weigh you down like a big DSLR but it has easy-to-use settings that allow you to switch back and forth between inside and outside shots.

Once you have a good camera it’s time to work on your technique.  For starters, turn off the date stamp feature and don’t ever shoot directly into the sun.  And unless you want to end up on UglyHousePhotos.com, do not to capture your reflection in the mirror while taking that picture of the master bathroom (a little tip here – kneel down below the mirror.)  Leif Swanson a Realtor and creator of the site, also says you should never take pictures from your car or at night, and never have people or pets in the image.

There you have it.  You now know what you already knew.  What I have written here may not get you to the gym or prevent you from drinking a bottle of wine at dinner but at least you’ll start selling more houses.

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Future of Real Estate Marketing guest blogger this week – Marty Boardman

I have a lot to celebrate this week.  On Friday, I’ll be catching up with my classmates at our 20 year high school reunion.  Sunday is my 12th wedding anniversary.    

I’m also incredibly honored to be chosen the Future of Real Estate Marketing (FOREM) guest blogger for the week. FOREM and Inman.com are two of my favorite real-estate related websites.  Here’s a sneak peak at what I’ll be writing about:

  • Tuesday, 10/5 – 3 Steps to Writing a Better Blog
  • Wednesday, 10/6 – Facts Tell, Pictures Sell
  • Friday, 10/8 – The Man Who Mentored a Billionaire

 Your feedback is always appreciated.  I could also use a few suggestions on an anniversary gift for my wife.

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How About a Homebuyer Mulligan?

The story is part urban legend, part sports folklore.  David Mulligan was driving to the golf course one crisp, early morning when he nearly crashed his car after crossing a rough bridge.  His nerves were understandably frayed by the time he reached the clubhouse.  As he gripped his driver at the first tee box the events from earlier that morning flashed through his mind and he shanked his golf shot into the woods. 

David’s friends, a very forgiving bunch, took pity and gave him another shot without a penalty.  The rest is sports history.  The “do-over” shot, more popularly known now as the ‘Mulligan’, became a part of the golf glossary forever.  As a matter of fact, the term ‘Mulligan’ has transcended golf.  You can now hear it used in other sports and life situations whenever someone needs a do-over.

The median home price in Phoenix dropped 2.26% from June to July and sales are down 26% from this time last year, according to Tom Ruff of the Information Market. Much has been written lately by economists, analysts, pundits, politicians, columnists and bloggers about what can be done to turn this housing market around.  It appears as though the homebuyer tax credit has done more harm than good.  It artificially boosted prices and now that it is gone sales are plummeting faster than my golf handicap after a few cold ones at the turn (for you non-golfers that means my game falls apart after I have a few beers between the 9th and 10th holes.)

Last week, the Treasury department held a Future of Housing Finance conference to discuss this issue.  Bill Gross, who runs PIMCO, the world’s largest bond fund, was there and advocated that all government backed loans over 5.75% (Fannie Mae, Freddie Mac, FHA) be readjusted to today’s interest rate.  This plan, according to Gross, would provide much needed stimulus and boost home values by 5-10%.  Sounds like a good idea right?  Unless, of course, you are a bond investor.  They argue that’s robbing Peter to pay Paul.

No one invited me to this conference.  I recently moved so it may be because they didn’t have my new address.  But, I’m not that hard to find so I can only conclude that they could care less about what I think.  Nevertheless, I’m going to submit my opinion here and hope this gets passed on to the powers that be.

I know a doctor, attorney, physical therapist, social worker, church pastor and engineer who are all upside down on their mortgages and are going through short sales.  These are responsible, educated, hard-working people that, besides the mortgage on their primary residences, are current with all other payments.  They have good incomes, cash reserves and assets.  Their only mistake was buying a home at the absolute worst time in American history.  These people deserve a do-over, a homebuyer Mulligan.

Banks should loosen up their lending criteria and lend money to people who:

  1. Have just one blemish on their credit report (i.e. a short sale or foreclosure).
  2. Have an income greater than 3 times their mortgage payment.
  3. Have at least 20% to put down.

The banks wouldn’t even have to offer rock bottom interest rates.  I’m fairly certain they could get at least 3-4% above prime for a loan product like this.  It would allow hundreds of thousands of Americans to become homeowners again and increase demand at every price point.  There would be dancing in the streets and I would finally get invited to the big Treasury department meetings.

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Your Home is Not an Asset; it’s a Place to Live

I was standing at the checkout line in Target on Sunday with my 7 year-old daughter, Allyson.  She desperately wanted me to buy the spearmint Icebreaker breath mints.  Now I’ll admit…these things are good.  But, at $1.99 they are a want, not a need (unless of course I just ate Mexican food.)  I decided that this was an opportune teaching moment.  I explained to my daughter that Icebreaker breath mints are a liability, not an asset.  They cost a lot of money and within a few hours she will have nothing to show for her investment.  My comments didn’t stop her from wanting the breath mints but they did make her think.

I can’t really take credit for this clever parable.  It just so happens that I’m reading Robert Kiyosaki’s ‘Rich Kid, Smart Kid’ book.  Among the many lessons he writes about is the importance of understanding financial statements.  Poor people buy liabilities.  Rich people buy assets.  If we can instill this fundamental concept in our children can you imagine how much better off they will be financially as grown-ups?

As adults we frequently mistake liabilities for assets.  Your home is a perfect example.  How much are you paying to live there?  There’s the mortgage, utilities, HOA dues, repairs, taxes and insurance.  Yes, your home will eventually go up in value and if you’ve been paying down principal you may actually have equity.  However, when you sell and move away then chances are the next house you buy will have gone up in value just as much, thus negating the increase in value and reduction of principal in your old home. 

The same can be true in a real estate market moving downward.  My parents sold their house at the peak and purchased a new one closer to me and my family.  Within a year the bottom dropped out and they watched values in their neighborhood drop by more than 30%.  I did some quick research on their old neighborhood and found values there had dropped by more than 40%.  I explained to them that in the end they were no worse off – the market in both neighborhoods was almost identical.

Once you understand this it’s easy to see that your home is not an asset or investment; it’s just a place to live.  When you hear someone say your home is an asset they are not lying to you.  As Robert Kiyosaki points out in his book, your home is an asset – the bank’s asset. 

The bottom line is ANYTHING that costs you money is a liability.  I recommend getting in the habit of asking yourself these questions every time you reach for your wallet:

  1. Is this a want or a need?
  2. Will this cost me money or make me money?
  3. Is this an asset or liability?

More assets and fewer liabilities – that is how wealth is created.  It’s like Robert Kiyosaki’s Rich Dad once said, “One of the main reasons people work so hard is that they never learned how to have their money work hard.  So they work hard all their lives, and their money takes it easy.”

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