Paul Slaybaugh, Scottsdale AZ Real Estate

• Housing will not fully recover until 2012. That is when the glut of backlogged foreclosures is expected to be phased out of the market.

• Housing will recover by the end of the year. Now that inventory has contracted to average levels for what constitutes “normal” regional markets in major metropolitan areas where prices have declined as much as 50% in the past three years, and month to month sales have steadily increased over the past six months, demand has realigned with supply to arrest the freefall in values.

• The housing recovery began in early 2009. Median price increases in some markets indicate that even while many pundits were openly wondering when the bottom of the market would appear, it was actually several months in the rearview mirror.

Many factors and variables, and just as many divergent opinions to boot. So many, in fact, that you almost have to choose amongst the purported experts to determine whether you fall in the half empty or half full category. Job rates, interest rates, unemployment rates … psychiatric rates, for spending too much time poring over the data and extrapolations will render one in need of a head exam.

Overanalysis 101.

You don’t need flow charts to tell you where things stand at the moment. You won’t need a market report to tell you when things are better.

You’ll know the market has recovered when you no longer dread the trip to the mailbox or evening phone calls.

You’ll know the market has recovered when you can confidently re-enable automatic bill pay from your checking account instead of prioritizing which ones get paid this month by how far past due each is.

You’ll know that the market has recovered when you don’t have to decide whether you or a loved one is really ill enough to warrant the cost of a trip to the doctor.

You’ll know the market has recovered when you no longer have to explain to the kids why you can’t go to the zoo or stop for ice cream today.

You’ll know the market has recovered when sleep comes as readily as worry formerly did.

You can stop looking to someone else to tell you when the market is fully healed as the housing implosion is the root of these greater ails. It’s far easier to take stock of your own life, and those of your friends and family, to see where along its arc the pendulum is currently settled. As the finance/housing sector dragged our economy into the muck, it will again lead us back to dry ground. No need to watch the stars for celestial clues. Just do what no pundit can and watch your own life for improvement. You’ll know housing has recovered when both of your own feet are planted squarely on terra firma.

Most importantly, beware the forecasts that don’t jive with your own internal index. Those who would adamantly assert the rosiest or bleakest prognosis are likely more interested in influencing your behavior than in your well being.

“Buy now before prices shoot back up!”

“Sell now before prices erode further!”

When you stop listening to yourself, you risk placing all of your trust in the megaphones of those who have a vested interest in your fear.

Is the housing market improving? Is now the time to buy? The time to sell? For months, I have been asked to provide the answers to these questions. I have dutifully provided my vague predictions with the obligatory caveat that no one truly knows how a free market will behave from one day to the next. I realize, though, that in supplying answers to those who actually give the market context, that we have all been looking at this thing from the wrong perspective. It makes zero difference where I think the market stands at present, and where it is headed. The very consumers who ask me these questions are the ones who will ultimately provide the truth or fallacy to my various hypotheses. So I turn the tables and ask the consumer, the actual authority, the very same question.

“What is the state of the Real Estate market?”

Feel free to comment here or send me an email with your thoughts. Looking for opinions from consumers and laypersons, not agents or financial wizards (all comments welcome, though). I will post the results in a follow-up piece.

Mr. Homeowner & Mrs. Homebuyer, the floor is now yours.

Without reasonable question, banks are in charge of the current Real Estate market here in Scottsdale and the greater Phoenix area. Patently absurd low pricing of an overwhelming abundance of foreclosure and short sale listings dictates that financial institutions remain the bully of our local pulpit. While we may lament this eventuality, we certainly cannot deny it without yielding hard-earned credibility. Dominance in the marketplace, however, should not be mistaken for carte blanche to operate in a manner independent of obligation.

Consumers, and by the transitive property their chosen agents, put up with a great deal when pursuing a distressed (be it physical or financial) property. Selling institutions call the shots on the choice of title company, manufacture from afar their own addenda that often flies in the face of local custom or … gulp … law. All too aware that these catacombs house the buried Real Estate treasure they seek, buyers eagerly agree to any and all provisions the banks and their lawyers concoct. For the most part, after scrutinizing the often arcane verbiage of said addenda and verifying that an actual, legitimate escrow company has been selected to perform the title work (as opposed to some flunky sister company on the other side of the country in which the seller has a financial stake), we swallow hard on the arrogance and proceed under the bank’s terms. The values on their properties are just too good to be dissuaded by negotiable minutia.

But that’s where it ends.

Perhaps a happenstance created by a bank that has become accustomed to proffering any mandate it wishes upon a transaction, many asset managers at said institutions and the lackeys charged with listing and selling their portfolios seem to have gained the mistaken notion that they can dictate deviations from the written purchase agreement based on the whims of internal policy. Case in point, I am currently embroiled in a transaction that is going along swimmingly aside from the seller’s constant refusal to execute documents that were agreed to and made part of the original purchase contract. I have heard numerous explanations for the contractual breaches, and some of them even make sense. None of them, though, absolve the seller of their contractual obligations.

The learned attorneys who advise their clients (banks) not to sign certain documents would do well to advise their clients to address such matters at the time, if not before, the contract is negotiated. I am not an attorney, but surely they understand that unilateral, after-the-fact contract revision and/or breach is far more likely to result in litigation for their clients than the terms of the documents found to be objectionable for one reason or another.

Then again, perhaps deterrence from future litigation is not in the best financial interest of that crack legal staff.

I call on buyers and their representative agents to stand up for the rights and protections you are afforded by the purchase contracts you execute. Fear of losing the bargain of a lifetime has led too many to cow-tow to the internal policies of the banks on the other side of the country table. Yes, there are certain stipulations you must live with if you wish to purchase a bank controlled property, but at the end of the day, they are just sellers who must abide by the same rules and regulations as everyone else. Assuming you didn't forget to pack heat on your way to a bank-owned gunfight, stick to your guns and do not suffer any shirking of the selling party’s obligations or infringement upon your contractual rights lightly. And make sure you grab the glock, not the air rifle. The pea shooter of polite request will just get your hair touseled and cheeks pinched.

It's big boy time when dealing with a corporate monolith.

I believe it was Confucius who said that he who hesitates gets flattened by an 18 wheeler laden with 10 tons of abject irony along life’s crooked highway. Or was it something about those who dally within the confines of a centrifuge being at great peril of becoming centrifugal? Regardless of the exact phrasing, the veracity of the axiom is never more resplendent in self evidence than in its pertinence to a Real Estate transaction. Get in, get out, and for God’s sakes man, do it on the quick step.

Case in point:

August 8^th, 2009. The night was warm and dry. Once again defying all logic, Phoenix did not burn up upon reentry into this late summer evening, and its denizens scurried out of air conditioned alcoves to forage for supplies as the sun dipped below the White Tank Mountains in the far Western sky. Taking full advantage of the reprieve, I was amongst the throng vying to get sixty eight errands done in a three hour span. That’s when the call came.

A little background. A client of mine purchased a beautiful home in Queen Creek two years ago. One job transfer and complete meltdown of Western civilization later, the home is unfortunately worth about 50% of its prior value. So we attempted to hammer out a short sale. Rife with frustration, incompetence, duplication and other multi-syllabic words, short sales are the very antithesis of expediency. It takes forever and a day just to get a negotiator from the bank assigned to the transaction. Once the negotiator is assigned, it can literally take weeks just to choke the direct phone number to the cave where they hide him out of a disinterested call center employee.

It’s crazy. It’s maddening. It’s 2009.

The upshot is that 6 months and many stops and starts later, the deal we secured was approved by the bank and headed for closing. Loan docs were in and we were set to put a ribbon on the whole shebang in two days. It didn’t matter that the bank had screwed up the first approval by providing an unrealistic closing window. It didn’t matter that it took an additional three weeks and a new set of BPOs (broker price opinions) to get the closing timeframe extended to a reasonable period of time to line up the buyer’s financing. It didn’t matter that the buyer had nearly backed out several times during the interminable wait as concern mounted about the continued erosion in values. Or that we had to sweat through an appraisal in August for a sale that was negotiated in February. We were finally at the finish line.

And then the fateful call came. Had the pool service not been performed? Was there new damage to the property? No, we had somehow managed to ride out the entire escrow without incurring any additional issues with the home itself.

The buyer lost his job.

Called in over the weekend and informed that his services were no longer wanted, months of work went straight down the portal to Real Estate hell that opened up under our feet. More pointedly, months of waiting went down said portal. Had the lienholder acted with the expediency and urgency that actual Real Estate professionals understand is vital to the successful culmination of a transaction, the unfortunate eventuality would be somebody else’s problem. Instead, the hot potato remains firmly in the bank’s seared hands.

Time kills deals.

The glacial pace that most institutions operate with only serves to demonstrate why bankers should stick to banking. The moral that the average consumer can take from this tale of woe is that you never take a Real Estate sale for granted. Things can and will happen between contract acceptance and closing. To limit those things that can sink your battleship, you want to get to the closing table as soon as humanly possible. Death, job loss, a bad night in Vegas … any manner of variable can rear its red inked head to sabotage your sale.

When you have the opportunity to close, close. If that means you have to reschedule the movers and change the turn-off date on your utilities, so be it. A little inconvenience is cheap insurance against catastrophe.

Flattened by the big rig and dizzy from centrifugal force, we limp back onto the market. Nimble as we can be with a 500 pound gorilla in tow.

Everyone wants a piranha.

Whether a professional athlete intent on a signing bonus the size of Madagascar, a victim of a vicious fender bender fixated on the 2.8 million dollar legal prescription for a tender neck or a home buyer/seller whose sole purpose on this earth at the immediate moment is to grind as many Ben Franklins as possible out of the guy on the other side of a negotiation, aggressiveness is typically the hallmark virtue in the professional representation that is sought.

The sports super agent, who we are 95% certain has a life-sized portrait of his bare chested self wearing a boa constrictor around suspiciously well tanned shoulders hanging in his posh downtown office, is universally loathed by all. Secretly, however, we all know he’d be the only guy we’d call if we needed to make a cash withdrawal from the abundant posterior of a team owner.

The weaselly ambulance chaser with the slicked back, Grecian Formula enhanced locks is similarly unlikely to find himself on the guest lists of many Bat Mitzvahs and baby showers. That narcissistic predator might eat the baby. When we spill the drive-thru coffee in our laps or stumble over the “Watch Your Step!” sign at a public establishment, though, he’s the guy we call.

Amicable folks are great to have around, but when the conversation turns to business, we don’t want Mary Poppins going into battle on our behalf armed only with a spoonful of sugar to make the medicine go down. We’d rather employ the services of Dr. Jekyll to go all Mr. Hyde on the opposition and cram that spoon straight down their throats.

Easy, tiger.

There is a time to kill, and there is a time to frolic. The problem with the constant grinder is that he often grinds himself right out of a transaction. It is critical that you leave the other guy with some dignity at the end of a tough negotiation, lest all of your efforts collapse under the weight of the other party’s exhaustion. After you’ve knocked the poor bloke to the ground and bloodied his nose, do the smart thing. Extend your hand and help him up.

In practical terms, this is akin to finally saying “yes” after repeated “no’s.” When you win on the key points, you are often in a position to make a small concession on some trivial tangential issue. Too many times, I see lost opportunities for a clear victor to score easy diplomatic points at these junctures in the waning moments of a deal. Want the inspection and other critical aspects of the transaction yet to come to go smoothly? Give up something that isn’t really necessary. Offer something minor, but unexpected.

You’ve bitten his neck on price, drank his blood on terms … time to give him a transfusion unless you want to carry his Doppelganger the rest of the way to closing. For the record, undead weight is quite heavy.

Of course, because you are reading my blog, this advice assumes you were on the dispensing end of said treatment throughout the course of the initial negotiation. If you were unfortunate enough to be on the receiving end, go ahead and drive a wooden stake through the SOB’s black heart.

*Originally posted at the Scottsdale Property Shop.

There is always opportunity in the margins. Unfortunately, margins tend to attract the marginal.

The latest water cooler rumbling to emerge from a recent tour group meeting centered on a purported professional short sale negotiation company. Here in the Valley, short sale negotiation has become its own cottage industry in the past year and a half, and for good reason. Most Realtors had never encountered a short sale before the recent woes in the market. You can include me among those ranks. As such, there has been great demand recently for third party professionals who know the drill and have contacts within the various institutions for expediting the process. While the skill-set required to negotiate with the bank is really little more than gumption, persistence and know-how, the learning curve can be steep, and the time commitment impractical. Many agents would rather enlist the help of a specialist to handle this critical portion of the transaction than practice on their first few short sale clients. The stakes are too high for an erstwhile, but bumbling rube to fumble it all away. For many of us, it just makes good, practical sense for all parties involved.

Now comes the “but.”

Back to the recent tour meeting of which I mentioned, the latest scuttlebutt is that at least one major short sale negotiation company is the focus of an open investigation. It seems there is some question as to whether this outfit was utilizing fraudulent measures to cash in on a much grander scale than the stated fee of their services. Nothing has been proven, and no charges have been filed to my knowledge (hence the glaring omission of the company name here), but the concern is that this company might have engaged in the “double escrowing” of the short sales they were hired to negotiate. Plainly stated, upon receiving an offer that both buyer and seller had executed and forwarded to the negotiator to submit to the bank for review/approval, this company is thought to have tabled said offer and worked to negotiate an even lower sale of their own with the bank. Once accepted, they would orchestrate the virtual simultaneous closings in which they bought the property from the bank and turned around and sold it to the buyers at the higher price. Neither the buyer nor seller would ever know that there were actually two transactions taking place concurrently.

Of course, if the negotiation with the bank failed, the buyer and seller would simply be informed that the offer had been rejected … eventually. Even though the bank never saw it. The buyer wouldn’t be overly thrilled to learn of this, of course, but the seller is the one who really stands to lose in such a scenario. He is the one with the imminent foreclosure and interminable credit limbo on the line while the entity hired to negotiate on his behalf plays Russian roulette with his financial well being.

So while nothing is proven in this instance as of yet, it serves as a consumer alert. While I was careful in the selection of the professional I have enlisted to negotiate with the various banks on my sellers’ behalf, some might mistakenly believe that any fly-by-night company that has branded itself as a “short sale negotiation specialist” is reputable. Just as you would exercise diligence and perform your own investigations in the selection of your Realtor, don’t let your guard down when settling upon the service enlisted to actually talk to the bank. Find out how long they have been in operation. Are there any complaints lodged with the Better Business Bureau (though some may be such neophytes that they haven’t been around long enough to incur complaints)? How long has your specific negotiator been involved in either the Real Estate or banking industry prior to their current position?

Maybe I’m just jumping at shadows, but I can’t help but wonder if this is a niche that won’t prove to be populated by failed Realtors, loan officers, car salesmen, financial advisers, taxidermists, Maytag men and arthritic slow-pitch softball umpires in hindsight. There are some good ones out there who are absolutely invaluable to the busy Realtor and desperate seller alike, but I am under no illusion that there aren’t more than a few soulless chasms of dollars and teeth hiding behind the polished veneer of a snappy tagline as well.

When dealing with a property that you are trying desperately to sell before the bank forecloses, the stakes are elevated to financial Thunderdome proportions. If your short sale survives the fight, you will walk away with a limp (credit damage, possible tax ramification, etc), but at least you walk away. A foreclosure will effectively kill your aspirations of future home ownership for the next 5 years.

Choose your weapon wisely.

*Visit the Scottsdale Property Shop for the latest news in Scottsdale Real Estate*