Phoenix Real Estate Market Update (Gilbert, Avondale: big home, tax credit, live)

[Friend of Sonic]

Originally Posted by Captain Bill

If you qualify for an FHA mortgage you can buy most any home. The exception is that some traditional sellers may elect to not sell to an FHA loan because of some of the issues that come up and take more time dealing with FHA.

All of the bank owned homes I've looked at recently are over priced for the current market. Over most of the valley they're listing at higher prices than short sales.

Well, I do have FHA qualification. The problem is the investors submit cash offers and beat me out-- even if my offer is higher, they'd rather deal with cash. I think this week I will be on offer #12 because of that.

[Captain Bill]

Originally Posted by ReadyFreddy

How many appraisals have you done? I'm not claiming any superiority. My comment was that I have never met any appraiser that ever looks at price per square foot. Maybe you have. No one has to be more right.

Ok, to answer your question regarding my appraisal experience:

• I am not a licensed appraiser, therefore, I have not done any "appraisals".
• Appraisers use one or more of 3 approaches to value.
  .....Sales Comparison Approach (used for residential properties)
  .....Income Approach (used for investment properties)
  .....Cost Approach (used mostly for special use properties)
• I have extensive studies in appraising properties using the Sales Comparison Approach
• I have studied the Income Approach method of appraising and used the skills in buying 4-plexes in California and rental properties in AZ.
• I have not studied the Cost Approach
• I have the Business Brokerage designation which allows me to evaluate and determine the value of a business and represent buyers or sellers of businesses. I have sold two of my own businesses, but elected to remain in the residential market rather than specialize in Business Brokerage.
• I have used the Sales Comparison Approach in performing over 1,000 bpo's for banks (same basic technique used by appraisers)
• I've had to study the bpo technique courses for Bank of America and Single Source prior to being assigned bpo's (I stopped doing bpo's last year)
• I average about 1 full CMA (which is close to a bpo) a week for the past 7 years.
• Every day I check the comps for one or more of my clients.

We were getting nowhere with the discussion because as I said, I believe we're dealing with semantics.

So here is the process of a Sales Comparison appraisal which is used for all residential sales:

The appraiser starts with the Sold price of a comp and computes the price per square foot of the property. Then s/he makes adjustments for differences in amenities, extra bath, extra car garage, including the lot size if there is a large difference, and the house square footage adjustment (gross living area) on the form, exactly the same as we do with bpo's and a full CMA.

To do the quick comps that I have to do every day, I start with the price per square foot where I can see in an instant if a house "may" be over or under priced. (This is assuming the typical tract home)

In most cases in homes under $300k I can stay within the community. So can the appraiser, or bpo. I look for homes sold as recently as possible, within (+-)20% of the square foot size, within 10 years of age, and with close to the same amenities. If the subject is a traditional sale, I'll use traditional comps if possible, or make an adjustment if I have to use other comps.

That gives me an average price per square foot for that type house in that community, and a price. Then If I need to make an adjustment for pool, or others I'll do that to arrive at a target price.

All of these approaches utilize price per square foot, whether it's the Realtor doing quick comps starting with the price per square foot and working backwards, or a CMA, bpo, or appraiser, starting with sold price and then making a square footage (gross living area) adjustment using a price per square foot for that adjustment. In the appraiser form I posted you'll see that he made an adjustment for price per square foot for the lot, and for the GLA (Gross Living Area).

On the appraisal form, you'll notice at the top, the appraiser has listed the Sold price of the comps, and on the line below that, he had computed the price per square foot in the field "Sale Price/GLA".

Then further down below in the field "Gross Living Area", he lists the square footage of each property, and shows a price adjustment for square footage. He did that by using an arbitrary price per square foot of $50/sf. Whereas the price per square foot for the entire property of the #1 comp was $162.89/sf, he apparently used a bare wall price/sf of the GLA (excluding any amenities) of $50/sf to make that adjustment.

For my purposes in evaluating a property for my buyers or sellers, I also look at the Active listings to see what other similar homes are asking for their property. For a seller it's important to know what the competition is doing in order to develop a listing price strategy. For the buyer it's important to know if the same home may be selling at a lower price than the target home.

In addition, I look at the Pending listings because that tells me at what price these homes are attracting offers, and gives an indication of whether prices within the community may be decreasing or increasing.

[Captain Bill]

Originally Posted by Friend of Sonic

Well, I do have FHA qualification. The problem is the investors submit cash offers and beat me out-- even if my offer is higher, they'd rather deal with cash. I think this week I will be on offer #12 because of that.

That isn't unusual in this market. You just have to keep looking and offering.

[Bideshi]

Originally Posted by Captain Bill

That isn't unusual in this market. You just have to keep looking and offering.

I've been having the same problem-for two years now...

[Friend of Sonic]

Originally Posted by Captain Bill

That isn't unusual in this market. You just have to keep looking and offering.

Oh, no. I'm not arguing that at all. And I have been, but it seems like my best shot is in the Homepath arena where they at least exclude investors for a couple of weeks.

[Home Addict]

Originally Posted by Friend of Sonic

Oh, no. I'm not arguing that at all. And I have been, but it seems like my best shot is in the Homepath arena where they at least exclude investors for a couple of weeks.

And HUD.

Homepath excludes investors for first 15 days, but HUD excludes investors for first 30 days. Although HUD doesn''t have the special financing that homepath has.

The HUD website provides more information on the properties they list. They almost always have had an inspector (or someone in that capacity) check the property before listing it. You can find it in the disclosure section, and the reports list the items that need fixing. Often, there isn't much to fix.

Good luck.

[ReadyFreddy]

he had computed the price per square foot in the field "Sale Price/GLA".

Then further down below in the field "Gross Living Area", he lists the square footage of each property, and shows a price adjustment for square footage. He did that by using an arbitrary price per square foot of $50/sf. Whereas the price per square foot for the entire property of the #1 comp was $162.89/sf, he apparently used a bare wall price/sf of the GLA (excluding any amenities) of $50/sf to make that adjustment.

The software fills in the price per square foot automatically. Then (in my experience) the appraiser never looks at that value except to pick a common fraction of it to use for GLA adjustments across the grid. The rounded 1/3ish your example used is common, if I recall right. (One reason one wouldn't use the whole value is each home has 1 kitchen and x baths, which are the pricier parts to build, and bath count is adjusted separately. An extra 300 feet in the great room isn't as valuable as that kitchen was. Not all square feet are as valuable, which is one inherent problem with the metric.)

It is just semantics, I think, but appraisers don't think in terms of price per square foot at all. I only did it for two years, and followed trainers for 18 months before that, but I took and passed all the classes, of course. I averaged two appraisals per day for that 3+ years, so it's a lot of appraisals. I also have a masters in finance and another in information resources. I found my original field to be more to my liking so I went back to it (when the market was in tanking mode anyway). I did the appraisal thing because I had the opportunity and I wanted a little change after 15 years in institutional investment research software. So I didn't really closely read your tutorial on how appraisals are done but I'm sure it's great info for others.

[Friend of Sonic]

Originally Posted by Home Addict

And HUD.

Homepath excludes investors for first 15 days, but HUD excludes investors for first 30 days. Although HUD doesn''t have the special financing that homepath has.

The HUD website provides more information on the properties they list. They almost always have had an inspector (or someone in that capacity) check the property before listing it. You can find it in the disclosure section, and the reports list the items that need fixing. Often, there isn't much to fix.

Good luck.

I did not know this! Thumbs up and thank you.

[whodiman]

Originally Posted by Friend of Sonic

Well, I do have FHA qualification. The problem is the investors submit cash offers and beat me out-- even if my offer is higher, they'd rather deal with cash. I think this week I will be on offer #12 because of that.

I feel for you. Must be really frustrating. Good luck.

[PhinsFan1]

Originally Posted by Captain Bill

Taking a look back, we see the average Pending prices were:

• $77.59........ August 2011
• $81.88........ Jan 1, 2012
• $84.89........ Feb 14, 2012

That's' a total increase of 9.4%, and 3.5% since last month. A leveling out of the average Pending prices could indicate that the recovery may be going to stall. However, the upward trend appears to be getting stronger.

Nice. So it'll be back up to $118/sq ft, about what I bought at, in NO TIME!