Hinge Buyers....Jacki's new phrase...will it catch on, and what is it?

It's a buyer's market. How often have we heard that lately? I have to say though, I dunno about all that. I think it's a stale-mate market personally. Here's why:

As Jay Butler pointed out in an article in today's Arizona Republic, Buyers must first be sellers. And as we know, sellers are having a tough time right now. So it's the old "chicken or the egg" question in real estate...what comes first, the buyer or the seller?

Does it all come down to people who are buying that don't currently own a home? Or maybe the second home buyers? It's like a domino theory....there's one buyer that has no contingencies (aka a house to sell before they can close on the home their buying) that starts the effect.

Example:

John Buyer buys a $300,000 home with no contingencies from Jane Seller. Now Jane Seller can buy her move-up home for $400,000 from Susan Sellsalot. Susan Sellsalot can now buy her dream home from Sam Sellnow for $600,000. Sam Sellnow can now start working on his financial goal of becoming an investor. Sam takes the profit from his house and buys an investment property for $250,000 and a personal residence for $500,000. Now we have 2 more buyers in the market...and so on and so forth.

See what I'm saying here?

So now EVERYTHING hinges on good ol' John Buyer. I am right now coining the phrase "Hinge Buyer"....that describes John Buyer in a nutshell. (and if you've heard this term before, let me know. But I think we might be looking at a Jacki Semerau Original here.)

Easy enough, right? There's always first time home buyers out there, right? And if you think about, hasn't real estate been like that from the very beginning? I can see Chris Caveman, needing to upgrade to a larger cave due to his growing family. So he barters with First time cave dweller Dave, previously living in his parent's cave. You see where I'm going, right?

Ahhh....but it's not that easy anymore, now is it? Why not? Here it is...the Real Estate Buzzword of My Blog, SUBPRIME.

With the subprime debacle still in effect, lenders are all too scared to lend their money. Some guidelines are way too strict for John Buyer to qualify. If John Buyer doesn't qualify, then all of those subsequent sales mentioned above don't happen. Leading us to a Stalemate.

As I heard on a real estate radio talk show this week, the pendulum looks to be swinging too far in the opposite direction. So how long do we hold on? Where do we find those first time buyers that DO qualify? What can we do to change the direction?

Post a comment and tell me what you think....where do we go to find the "Hinge Buyer?"

It's News to me...

Today's Arizona Republic had an article, Valley Home Resales Slow. This article is something to ponder. Not the stats, or the fact that the market is "slow", but rather the question, what is the positive spin on this?

If you know me, do business with me, or otherwise were directed to this blog by me, then you most likely focus your real estate career in the Northeast Valley. So when you read articles about the "Valley Market" or the "National Market", you need to remember that our world is a little different. In Scottsdale and surrounding areas we don't share the same issues as other places in the Valley, like Gilbert or Surprise. We don't have new-build communities around every corner. Communities that are dropping prices and offering an insane amount of discounts to buyers, making it extremely difficult to compete with.

We also have the attractions that buyers want: prestigious location, golf communities, proximity to business, airport, shopping, and transportation corridors. When we look at the things that Arizona has to offer that will keep us going, we see that our NE Valley is THE place to be.

So don't let the Republic, or any other news source, get you down. Rise above the negativity, and stay positive. Don't get me wrong, I'm not telling you to ignore facts, or put on those proverbial rose-colored glasses, thereby walking around with your head in the clouds. Quite the opposite. I encourage you to be and stay realistic. Set your expectations as such. Stay informed on what the news reports, especially because this is often the only education on the real estate market that your clients and prospects receive. You need to know what they are learning, so you can sort out fact-or-fiction issues for them. Give them the real scoop, not the sensationalized. As I am always reminding my agents, the reporters' job is NOT to report the news. It's to sell newspapers. And let's face it, sensationalism sells.

Want to stay informed? Contact me to learn more about NATnews, our daily real estate news email blast. It's free, and can keep you informed on the day's news pertaining to real estate in Arizona. Email me at jsemerau@nat.com or by calling me at 602-294-2904.

Until next time...

And the Real Estate Buzz Word of the Week is...

Short Sale. (Ok so that's two words...but who's counting?)

If you've read the real estate headlines lately, then you've heard the term. Everyone is talking about it. It comes on the heels of the last Real Estate Buzz Word, "Foreclosures." But what is it, and why all the attention?

In short (excuse the pun), a short sale occurs when the following conditions apply:

• A homeowner has a lien (aka mortgage or loan) against their house.
• The homeowner cannot make the minimum monthly payment on the loan.
• The home's market value is currently LESS than the balance of the loan, thereby putting the homeowner in a situation of not being able to afford to sell their home.
• The homeowner wishes to avoid foreclosure.
• The homeowner contacts the lien holder (aka bank or lending institution) and arranges for the lien holder to accept LESS than what is owed to payoff the loan in full.

Well, this certainly makes sense if you're the homeowner, right? Who wants to face foreclosure? Ruin their credit? Have the stress of a large payment they can't afford?

Not so fast, Mr. or Mrs. Homeowner. A short sale is not a "get out of jail free" card. There are repercussions, but they are not nearly as severe as those of a foreclosure. You get to avoid having the enormous hit on your credit score that a foreclosure would deliver. However, you will still see a large drop in that credit score. With a foreclosure, you could be looking at an approximate loss of 250 points to your FICO. With a short sale, you might only see a loss of approximately 100 points.

Another negative for the homeowner is the fact that the lender will now deliver a lovely little note to the homeowner, and they will be so kind as to send a copy of that note to the IRS. These little love notes are often referred to as a "1099". But wait, you're thinking, a 1099 is only delivered for income. And you are correct. The IRS often views the forgiven portion of the debt as income. That's right...the homeowner will most likely need to pay taxes on that amount.****2008 Update Note: thanks to the government's involvement, this may not apply. Contact your attorney or CPA for more information on why not!******

Still...this is better than losing your home outright. So for someone facing a foreclosure, this is a very viable option. But why would the lien holder be willing to accept less than the amount owed? What's in it for them?

For one, the lender is in the business of loaning money. They are NOT in the business of owning real estate. So the fact is, the lender does not WANT the house. Second, there are alot of costs for the lender to take a home through the foreclosure process. All in all, most lenders would like to avoid the costs, headaches, and extra work involved with the foreclosure process. And who can blame them? So for the lender, it is often a wise business decision.

So there's a bit of the basics, delivered a bit tongue-in-cheek. But in all seriousness, if you are a real estate agent, you need to be well educated on short sales. Because this "Buzz Word" is not going to go away anytime soon. And you will need to be able to properly advise your clients who may be in a tough financial situation. And it's more common than you may think. What with ARMs adjusting to their higher rates, property values declining in the past couple of years, and homeowners that chose to use their home as an ATM when property values were at their height, you never know when a past client of yours will call you looking for help.

But don't think that just because you've read a blog on short sales means you are fully educated! If you'll be advising your clients, you need to know more. Email me at jacki@jackisemerau.com and I'll get you more information, articles, and resources.

Until next time,

Jacki