Sonoran City News

Why Isn't Your House Selling? - Part 2

My email box is filled with people wanting to debate my "the only reason your house hasn't sold is price" statement so I thought I would visit it more in depth.

One of the first things people tell me when they are preparing to sell their home is what upgrades the home has. Typically a home seller wants to increase the selling price of their home in proportion to the amount of upgrades. I can see where this train of thought comes from. If someone spends $20,000 upgrading their kitchen it stands to reason that upon sale, they would like to recoup some, if not all, of the cost. In an older neighborhood this might be a valid argument.

If you are planning to sell a home in one of the newer suburbs of Phoenix, AZ, your home might not be old enough to need a remodel but you might have gone whole hog on the upgrades when you purchased. Do these upgrades justify pricing your home for more then the other homes in your neighborhood? Maybe.

Let's say you live in a subdivision which is less then 5 years old. You have granite counters and stainless steel appliances, travertine floors, Berber carpets and designer ceiling fans. When you purchased the house, these upgrades cost you an additional $30,000. To you, this should equate to selling your home for $30,000 more then the other homes in the neighborhood. Unfortunately, when it comes to selling your home, it just doesn't work that way.

Why Isn't Your House Selling?

We all know selling your home in the current Phoenix real estate market can be a challenge. Why hasn't your Phoenix home sold?

So, I've beaten the whole PRICE thing to death, but before I proceed, I'll smack it around one more time. PRICE is the only reason a house doesn't sell. I know you are thinking I am wrong, but eventually everything sells if you lower the price to a point where someone finds it attractive.

But let's just say you know for sure your home is priced right. There are four other homes in your neighborhood which are the same exact floor plan and you are priced at or below where they are AND you are priced at or below similar Phoenix properties which have recently closed.

If fact, your house is getting shown. Lucky you. But no one has made an offer.

OK - What does your driveway look like? The actual concrete? It is stained? Are there oil or rust spots? If there are, you need to think about the message you are sending potential buyers. That message is; We don't take care of our cars, we probably don't take care of our house.

Seriously. Clean your driveway. Even if the potential buyer isn't focused on your driveway, those stains are sending a message.

Now go stand at your front door. Time yourself. Stand there for 60 seconds and look around. Look at the door knob and the threshold. Look at the walls and the curbs. You see, potential buyers are going to be standing at your front door for about 60 seconds while the agent fiddles with the lock box. Those 60 seconds are an eternity when someone is making the decision to buy your home.

If you lose the buyer in those 60 seconds, you probably won't get them back once you get them in the door no matter how nice the inside is. It is really hard to recover from making a bad first impression.

Now go outside and take a good long look at the outside of your house and ask yourself what message it is sending.

Pricing Phoenix Real Estate

A man owns a 2,500 square foot home in a well established subdivision. He wants to sell. He had the home appraised 6 months ago for $450,000. He calls me and tells me he wants to list his house. I do a market analysis, pull comps, and tell him his home should be priced at $395,000.

He has a fit.

I explain there are 22 other homes in his neighborhood of the same floor plan all currently for sale. The highest priced is $415,000, the lowest is $370,000. In the past six months, 8 homes of the same floor plan have sold. The lowest for $362,000, the highest for $412,000. The average days on market for his neighborhood is 131.

He has a fit. He tells me that he looked his house up on Zillow and it shows $465,000. I try to calmly explain to him that he might want to ask Zillow if they are willing to buy his house for that price. He has another fit (I might have had that coming). He then explains to me that he has spoken to 2 other agents, both of whom will list his house for over $425,000. He tells me he will not be using me because I do not know what I am talking about and hangs up the phone.

This all occurred a little over 4 months ago.

Fast forward to yesterday...

Are you planning to move during school vacation?

Most families with school-age children prefer to move over the summer break so as to not disrupt the school year. This makes sense but requires thorough planning.

Let's assume the new school year begins August 20. You will want to be in your home and settled before this date. You will need time to get the kids registered and hopefully have the opportunity to make a few friends before the first day.

A typical escrow is 45 days. In order to hit our August 20 target date, you will need to have a signed contract no later then July 1. Here is where things get sticky. If you are like most people, you will need to sell your current home in order to buy a new one. This means your current home will need to have a contract on it no later then July 1 also.

Arizona House Beautiful - The Desert Living Show

The Arizona's House Beautiful - The Desert Living Show will be March 2-4, 2007 at Cardinals Stadium (University of Phoenix Stadium). Discount coupons are available on their site.

This is the place to be center for every type of home improvement. The show features design rooms, exciting landscape displays along with hundreds of exhibits and top professionals available to answer questions and provide direct assistance to those seeking outside help to complete home projects.  Viewed as one of the most prestigious shows in the industry. This show is new to the Phoenix market.

Phoenix Real Estate Market Statistics February 19-25

This is residential only. Derived from the Arizona Multiple Listing Service. It should give a good snapshot of what is happening in the market.

These are the statistics for 19 February through 25 February, 2007

Total Active Properties: 46513

Active - 2887 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	1	0	0	$ 12,900	$0	0
Avg	2026	3	2.27	$ 415,229	$0	3
Max	9500	22	8	$11,900,000	$0	7
Expired - 401 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	0	0	0	$ 33,399	$0	0
Avg	2016	3	2.22	$ 374,212	$0	163
Max	5400	6	4.5	$ 2,275,000	$0	727
Sold - 1070 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	519	1	1	$ 55,000	$980	0
Avg	1824	3	2.16	$ 324,770	$ 313,603	112
Max	6025	7	6	$ 3,000,000	$ 2,775,000	779
Cancelled - 946 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	0	0	0	$ 1,100	$0	0
Avg	2143	3	2.38	$ 427,793	$0	129
Max	9241	7	9	$14,500,000	$0	820

Pea Soup and Magenta - Maybe that's Why it's still on the Market!

Frequently I remind all of you that I am not artistic. I wish I was artistic. If someone were to give me one of those cute surveys which asked me to name one of my greatest (albeit shallow) regrets, lack of artistic talent would be right up there with marrying my first husband.

OK, so we have established I'm not the person to ask about decorating your new home. Maybe that is why most of my clients are investors. Investors look at property much differently then one who hopes to reside there.

Today I showed homes to a very nice couple who intend to buy and actually live in the house. I enjoyed the day and it was fun to see things from their perspective. We viewed a lot of properties which have been on the market for 100-200 days. Not surprising given the current state of the market.

What was very surprising was the condition of most of the homes. The first had broken windows and water on the kitchen floor (45 days on market). The second was a bank-owned foreclosure. The odor could knock your socks off. The pool was filthy and the carpets were crusty (109 days on market). One was 2 years old but had never been occupied. It had an industrial fluorescent light fixture in the family room (212 days on market).

The last house was the icing. The carpets were aqua blue, stained with crayon and pet evidence. The first floor walls were pea-soup green. As you looked up to the second floor you were confronted with the brightest magenta I have seen since elementary school. In the kitchen a light blue aqua was used for the walls. Obvious care was taken to ensure a straight line of paint where the aqua met the pea-soup. The cherry-on-top was the outdoor surround-sound system featuring car speakers. Days on market: 247

There is no doubt that the owners of this home loved it. They took pride in decorating to their particular taste and style and it is not my place to judge whether it was good or bad. We have already established I have no talent in this. However I do have experience when it comes to what sells a home. Neutrals.

If your home has been on the market over 200 days, it is time to ask your agent for an un-biased third party opinion. Seriously. As I viewed each of these properties today I instantly knew what was holding them back. Yes, the market is slow. Yes, now is a challenging time to sell. But seriously, you need all the help you can get and magenta walls are not going to help your home sell faster. They are holding you back. Think neutral.

Phoenix Real Estate Market Statistics

Phoenix Real Estate Market Statistics.

This is residential only. Derived from the Arizona Multiple Listing Service. It should give a good snapshot of what is happening in the market.

These are the statistics for 12 February through 18 February, 2007

Total Active Properties: 46243

Active - 3334 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	317	0	1	$ 32,000	$0	0
Avg	2024	3	2.28	$ 411,776	$0	3
Max	20000	22	25	$ 7,000,000	$0	7
Expired - 519 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	400	1	0.75	$ 42,500	$0	0
Avg	2025	3	2.29	$ 380,106	$0	155
Max	6902	8	6.5	$ 2,580,000	$0	577
Sold - 1123 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	533	1	0 .75	$ 45,000	$22,000	0
Avg	1900	3	2.21	$ 339,976	$ 331,179	109
Max	8100	8	6	$ 4,199,000	$ 4,500,000	711
Cancelled - 794 Properties Found
	Square Feet	Beds	Baths	List Price	Sale Price	Cumulative DOM
Min	367	1	1	$ 925	$0	0
Avg	2139	3	2.36	$ 428,131	$0	127
Max	7544	8	7.5	$ 6,595,000	$0	683

Every effort has been made to ensure accurate information but it cannot be guaranteed

Protecting Your 1031 Exchange

My earlier post on Southwest 1031 Exchange closing their doors and allegedly taking off with $83 million in investor funds prompted a call from a very nice gentleman in Texas who asked me some interesting questions. I'd thought I would share...

How does an investor prevent this from happening to them? Excellent question. First understand that with the exception of Nevada, there are no state or federal regulations for 1031 exchange accommodators or qualified intermediaries (QI). No bonding, licensing, or even segregation of funds is required. There is nothing to stop your QI from running off to the Bahama's and requesting citizenship.

I'm not an attorney and am not offering any legal advise, just common sense and experience. When selecting a QI, look for a well-established company (Southwest 1031 Exchange had been in business for 16 years, so age of business is no guarantee). Personally I would select a company with multiple locations throughout the country. IPX1031 has 44 locations nationwide (yes, I've used them and have always been very pleased by their service but I'm just referring to them for illustration here).  IPX 1031 is a division of Fidelity National Title Group. First American Title has a 1031 exchange division. First American Title and Fidelity National are publicly traded companies (again no endorsement implied). Does this mean nothing can go wrong because they are publicly traded companies? Well, no (uh, Enron comes to mind). But hopefully if something does go wrong you will have more avenues for recourse.

What other things can investors do to protect themselves? Once or twice a week someone will call me seeking advice on a 1031 exchange that they are currently involved in. I love talking to people (I've been frequently accused of not knowing when to stop talking). The problem is talking to someone who has already established an agency relationship with a REALTOR. I am bound by a code of ethics which basically prevents me from discussing a transaction that I am not involved in. The reasons for this are many. The bottom line is, if you are already working with an agent, I cannot help you even though I might really want to help you. I can discuss theoreticals and possibly discuss the replacement property if you are still in the relenquishing stage. Just know I might not be able to say much.

What you need to do before you sell your investment property is assemble a group of people who are knowledgeable on 1031 exchange. You need a good tax advisor with 1031 exchange experience and you need a good real estate agent with a background in 1031 exchange. There are no education requirements for real estate agents in 1031 exchange. Any agent can be involved in a 1031 exchange and have absolutely no idea what the are doing. When I first became interested in 1031 exchange I was told to attend a one-hour class held at a title company and I would learn all I needed to know. Wrong. I learned very little but believed I knew a lot. Not until after my first 1031 did I fully understand I would need a lot of education and would have to travel to get it.

Anyway, ask your accountant and agent how many 1031 exchanges they have been involved with. This should elicit a stream of anecdotes on the many facets of the 1031's they have done. At least it does with me. Listen to what they have to say. Then decide if this is someone you want on your team. Investment properties are very different from residential. Just because your best friend has sold your last three homes does not mean this is the right person to guide you through a 1031 exchange.

I've rambled enough for today. You worked hard to earn what you have. Make sure those you trust with your money know what they are doing and will work hard to protect it.

1031 Exchange Companies Close, FBI Investigates

Southwest 1031 Exchange Accommodators (qualified intermediary) of Nevada closed their offices 30 January while retaining a millions of investor's money. Nevada is the only state which has any type of registration requirement for exchange accommodators, and it requires only a $50,000 surety bond.

According to a court filing, at least 75 customers had money with the company. The losses could exceed $83 million. One group of real estate investors alone has $22 million on the line.  Clients started to become suspicious when their exchange funds were not being wire transfered for their replacement property purchases. Clients attempted to call and were given excuses which eventually led to the calls not being answered at all. Eventually one client went to the business to find the doors locked.

There are no regulations for how deposited funds should be held in a 1031 Exchange. With the exception of Nevada requiring Qualified Intermediaries (QI)to be registered and bonded, no other state have any regulation at all for QI's. The only real qualification for a QI is they cannot be dis-qualified. A dis-qualified person is the taxpayer, a relative of the taxpayer, or someone (such as an accountant or attorney) who has acted as an agent of the taxpayer in the past two years.

Think about that for a second. Technically, you could give your 1031 exchange proceeds to your neighbor to hold and that would be perfectly legal. You could have your grocer hold the money. How about the newspaper delivery person? Yep, they are qualified. Scary. Very Scary.

Anyway, the court has appointed a receiver to try to make heads or tails out of this mess. Millions and millions of dollars are at stake. People's financial futures are in jeopardy.

Learn more about 1031 exchange here.

I've posted ways to protect yourself in a 1031 exchange here.