Tucson Real Estate

Banks Could Make Some Money – But . . .

Here is a way for Banks to make more money on their inventory of Bank Owned Homes (REO) and Shadow Inventory.

Banks own homes that are not on the market.  “Shadow Inventory” has been said to be a HUGE issue.

Here is how Banks can make more money on REOs

Hire a data analyst, to compare available inventory in subdivisions against the Banks own Shadow Inventory.  If the analysis shows that a particular sub-division is low on available inventory that matches homes the Bank has in inventory, then put one or more of their homes in that area on the market.

Example

Subdivision A is located near the U of A.  There are no three bedroom homes on the market in that neighborhood.  The banks have three homes sitting in Shadow Inventory in that subdivision.  Put one or two of those homes on the market.

Since the bank has the only home available with 3 bedrooms in that subdivision they have an opportunity to get a better price.  (The law of supply and demand).  When they sell that property for a higher price they have just increased the Comp sale price for other homes they have for that subdivision.

It is pretty simple to do, doesn’t cost much once the model is setup for comparisons, and it can increase the banks bottom dollar while getting rid of some of their inventory.

This is how any agent who is about to take a listing finds the market price.

1. They find Sold comps for the neighborhood
2. They find out how many homes like the one they are listing are on the market and their list price
3. They now know where to competitively list the property.

That’s it.  Not an expensive process.  Quick to implement and increase the sale price.

However, I doubt the banks will do it.  Why?  It makes too much sense.

Tucson is not a Seller’s Market either

This goes against the conventional thinking that any real estate market is either a buyers or sellers market.  Maybe that was true at one time (but I doubt it).  Now we have a time in history where the interest rate on a 30 year mortgage is historically low.  Sale prices are as low has they have  been in over a decade which would tend toward a buyer’s advantage.  But one crucial piece of the puzzle is missing for a true buyer’s market; high inventory.

Tucson’s Low Residential Inventory

Have you even been in a store (Like Ross) the week after Christmas?  The shelves look like they are 80% empty.  Very little to choose from compared to the weeks leading up to Christmas.  Tucson’s available housing market looks a lot like one of those stores.

Not much to pick from

Currently in Tucson we have a very low inventory of available properties.  Even with the high number of foreclosures we don’t see that many properties on the market.  There are 5,587 active residential listings in the Tucson MLS system right now on Jan. 2, 2012.  Considering this includes properties in Vail, Oro Valley, Marana, Saharita, Green Valley and scatterings around Southwestern Arizona and a few in Mexico, that’s not a lot of inventory to choose from.

False Perceptions Can Lead to Poor Decisions

The general perception among many seems to be it is a buyer’s market in Tucson.  Make an offer that’s within 20 or 30 thousand of asking price then meet the seller somewhere in the middle and you can walk away with the property.  The reality: many are taking so much time deciding, they find their first, second, and third choices are going under contract while they “think about it”.

Think about it

Who’s swooping in and buying these properties while they “think about it”?  Buyer’s that have been in the market who have had their perception altered by the reality they have lost two or three homes which were their first choices.  Now realizing when they see something they like they better make an offer, not a low ball offer, a fair and reasonable offer.

Looking Back Won't Help

Presents are being wrapped, gifts bought and 2011 is wrapping up as well.  It has been an “interesting” year for the Tucson real estate market.  We continue to see the trends set early this year still in effect.

• 50% or more of transactions this year in residential real estate are either bank owned or short sales.
• Approx. 30% of all transactions are CASH transactions.

The Average and Median sale prices are down over last year but that is to be expected with half of the homes sold financially distressed properties.

Some are expecting hoping 2012 will be a better year to make a real estate transaction in Tucson.

I know there are people that would like to sell their homes and move up to a bigger home, likewise there are some that want to downsize.  Both directions see financing a purchase at all time interest rate lows.  Both directions see purchase prices the best they have been (probably since 2000).

But they also realize the sale price of their existing home isn’t going to bring in as much as it would have  a few years ago.  If they want to stay in the Tucson area, then it is a balancing act involving doing the numbers to see where they come out financially.  If they made their purchase anywhere from 2003 to present it could be very close.  If they purchased before 2003 they could have enough equity in their property to make a good move with minimal financial pain.

For some they will even come out ahead in the process depending on their circumstances.

Don’t Squander The Moment

Wish pricing has been around for a long time, and it bites a lot of sellers.  Every one wants to get the most out of their sale and pay the least for their next purchase.  It always depends on which side of the transaction we find ourselves.

Unfortunately, too many sellers start out Wish pricing their homes.  They waste that precious first two weeks on the market.  The best time to make an impression is the first impression with agents and buyers when your listing pops up in the MLS and is sent out to all the potential buyers looking for a home just like your home.

Wish Pricing Your Home

Too many sellers start the process unaware of “The Moment” dynamic.  They approach pricing with the “Let’s try it at . . . we can always come down”  Yes, you can always come down.  And if you squander the moment, you will have to come down.  The sad part is you will probably come down to a sale price less than you could have gotten in “The Moment”.

When you property pops up for the first time most agents know the market well enough to know if you are wish pricing your home.  And, most buyers who have been looking for any amount of time also have a pretty good idea of where a home matching their criteria should be priced.

If it is over priced for the market, both agents and potential buyers will “pass”.  You don’t want this bad taste in the mouth to be the first impression.

Realistically Market Price Your Home

Work with your agent to assess the true market value of  your home.  Find the sweet point in the process.

Sweet spot = where you can accept the price and it is not wish pricing.

Begin there and you have a much better chance of getting an offer during “The Moment”.