The Arizona Republic - September 2009
It should be the best time to purchase a home in decades.
Prices are at record lows. Many, if not most, of the houses on the market in areas such as Ahwatukee Foothills are owned by banks - not emotional and capricious homeowners.
Instead, even seasoned real-estate agents say it's the most difficult market they have worked in decades.
And buyers say they are frustrated with the condition of houses they find on the market - plus, they are getting caught up in unpleasant bidding wars with cash-rich real-estate investors.
"I have six buyers who want homes in Ahwatukee, but we can't find a thing," said Pam, a longtime Ahwatukee real-estate saleswoman.
"There also is a huge shortage of owner-owned, well-maintained homes," she said.
Pam said the selection of attractive, move-in-ready homes is low because owners who are not having financial problems intend to hang on to their properties until prices rise again.
So instead of walking through their dream houses, buyers are looking at repos gutted by evicted former owners.
"You would not believe the condition some of these places are in," said Nancy Nighswonger, an Ahwatukee resident who is helping her mother, Diane Moss, search for a comfortable home for her retirement years.
Buyers who want houses to live in must also compete with real-estate investors who have deep enough pockets to pay cash for discounted properties. Banks are creating bidding wars on such properties by calling potential buyers and asking them to up their offers, real-estate professionals say.
While that might sound similar to bidding wars for Valley houses at the peak of the real-estate market, experts say there is a difference: In 2005 and 2006, home prices were set at market value and buyers could offer higher amounts, depending on the competition.
"Now sellers are pricing their homes 25 to 30 percent below the market because they want to take eight or 10 offers to the bank (that foreclosed on the property)," said Pete Meier, who has sold real estate in Ahwatukee for 30 years.
Mike, another longtime Ahwatukee real-estate salesman, said the upside to the situation is that "the market is starting to move again."
Also, he said, buyers with the patience and fortitude to endure the bidding wars can wind up with great deals.
In some cases, houses in neighborhoods where houses/homes recently sold for $600,000 are now at "FHA levels" - the $300,000 range, he said.
Mike said he recently represented a house in Chandler that was offered as a "short sale" - the owners owed more on the house than what it was worth.
"I had nine offers on it," he said. "It was a very nice house. A million-dollar property originally."
The house sold for $449,000, he said.
Pam was so thrilled by a similar success story that she posted a message about it on Twitter.com the day the deal was signed.
The family she was representing - Honeywell engineer Rudy Dudebout, his wife, Tina Hynes, and their three sons, Eric, 6, Adam, 4, and Alex, 2 - had just paid $556,000 for a home that appraised for $1.2 million at the peak of the housing boom, she said.
The 1982 five-bedroom, 3,500-square-foot custom home backs to the South Mountain Preserve and has a pool, basketball court and a balcony overlooking a circular driveway.
"We had had our eyes on this neighborhood for a long time," Dudebout said. "It does not have the uniformity of looks that you find in other parts of Ahwatukee."
It helps not to be in a rush in the current housing market.
Dudebout said he and his family were prepared to stay in their old home until they found the right new house at the right price.
Saturday, September 12, 2009
Tuesday, September 8, 2009
Theft of fixtures becomes major risk in foreclosures
The Arizona Republic - September 2009
With a $165,000 price tag, the two-story, four-bedroom house for sale in Avondale was a steal.
Three years ago, when the house was new, a family paid $416,000 for it.
But its soaring living-room ceiling, whirlpool bath, three-car garage and pool with a slide and waterfall weren't enough to make it much more than a handyman's special.
Thieves made off with the home's $30,000 custom-kitchen and other fixtures after it went into foreclosure.
Custom cabinets, appliances, granite countertops and other fixtures just disappeared one day.
"These are fixtures that are supposed to be part of the house. They basically took $30,000 out of the kitchen and left," said John Lincoln, the real-estate agent who recently sold the house to buyers who don't mind fixing it.
Julie Halferty, a special agent who oversees the Phoenix FBI Mortgage Fraud Task Force, said no one knows exactly how many foreclosed houses in the Valley have been stripped by former owners, neighbors or strangers.
Those who work in real estate believe the number is in the thousands.
"Without question, probably 85 to 90 percent of houses on the market under $200,000 have been stripped," said Tempe real-estate agent Kim Baker.
"Appliances are the most commonly poached item, but plumbing fixtures and faucets, ceiling fans, light fixtures, water heaters and air-conditioning units are fair game" in the eyes of the strippers, she said.
Halferty said she and her fellow FBI agents "haven't been able to quantify it, but we know it is rampant."
She said that since metropolitan Phoenix foreclosures are up 600 percent since 2005 - half of the homes sold here this summer were bank-owned - she believes stripping is more common here than anywhere else in the nation.
"These crimes are happening with enough frequency that it has caught the attention of law enforcement, Realtors and lenders across our state," said Tom Farley, executive director of the Arizona Association of Realtors.
"Many Realtors are taking photos of the interior of the home as soon as they take a lender-owned listing to document the condition of the property in case of vandalism," Farley said.
Last week, the Maricopa County Attorney's Office announced five recent prosecutions of accused foreclosure strippers, including one involving a real-estate salesman.
Halferty said the task force hopes the information will educate owners of homes in foreclosure, neighbors and others that it is illegal to help themselves to fixtures and appliances in a vacant home.
"Take a look at Craigslist," Lincoln said. "It's full of things that have been stripped out of houses."
Halferty said Craigslist.org tipped the fraud task force to the extent of the problem.
"It is so blatant," Halferty said. "People would advertise that they were selling cabinets in a foreclosure sale."
Halferty said legally there should be no such thing as a foreclosure sale. The law states that anything attached to a home - stoves, cabinets, lights and ceiling fans - belongs to the property and stays there when it is sold.
Lincoln, who is based in Ahwatukee Foothills but represents properties all over town, said the problem is most widespread in Valley neighborhoods that were built during the housing boom a few years ago.
"Mature neighborhoods aren't seeing this as much as the newer neighborhoods in places like Avondale and Tolleson," he said.
While some homes are stripped by cash-strapped former owners, others are targeted by strangers.
Lincoln said one of his clients purchased a bank-owned house in Tolleson. Before it closed, thieves posing as pest-control workers broke in and removed $4,000 in appliances. The matter was reported to police, Lincoln said, but there has not been an arrest.
"Neighbors said two guys drove up in a white truck and said they were there to spray for bugs," Lincoln said. "What they really did was go in the backyard and bust a window to get into the house."
He said the deal still went through, but the family paid $6,000 less.
Talk to anyone searching for a deal on a house these days and you will hear similar stories.
"People are having to look at 20 or more houses before they find one that is suitable," said Jay Butler, director of realty studies in the Morrison School of Management and Agribusiness at Arizona State University at the Polytechnic campus.
"One of my students looked at 35. Doors are missing. Plumbing is gone. There is a huge secondary market for these things. People buy them and put them in their own homes."
In extreme cases, thieves rip copper pipes and wiring out of the walls, Baker said.
Nancy Nighswonger of Ahwatukee Foothills just wants to help her mother find a deal on a house for retirement. That might have taken a few weeks a couple of years ago.
"You would not believe the condition some of these places are in." Nighswonger said. "We've researched 100 houses and looked at 20 since June. All of them needed extensive repairs."
Getting financing to fix up damaged properties is not easy, Baker said.
"The FHA will not loan on a property that isn't fully intact," Baker said.
With a $165,000 price tag, the two-story, four-bedroom house for sale in Avondale was a steal.
Three years ago, when the house was new, a family paid $416,000 for it.
But its soaring living-room ceiling, whirlpool bath, three-car garage and pool with a slide and waterfall weren't enough to make it much more than a handyman's special.
Thieves made off with the home's $30,000 custom-kitchen and other fixtures after it went into foreclosure.
Custom cabinets, appliances, granite countertops and other fixtures just disappeared one day.
"These are fixtures that are supposed to be part of the house. They basically took $30,000 out of the kitchen and left," said John Lincoln, the real-estate agent who recently sold the house to buyers who don't mind fixing it.
Julie Halferty, a special agent who oversees the Phoenix FBI Mortgage Fraud Task Force, said no one knows exactly how many foreclosed houses in the Valley have been stripped by former owners, neighbors or strangers.
Those who work in real estate believe the number is in the thousands.
"Without question, probably 85 to 90 percent of houses on the market under $200,000 have been stripped," said Tempe real-estate agent Kim Baker.
"Appliances are the most commonly poached item, but plumbing fixtures and faucets, ceiling fans, light fixtures, water heaters and air-conditioning units are fair game" in the eyes of the strippers, she said.
Halferty said she and her fellow FBI agents "haven't been able to quantify it, but we know it is rampant."
She said that since metropolitan Phoenix foreclosures are up 600 percent since 2005 - half of the homes sold here this summer were bank-owned - she believes stripping is more common here than anywhere else in the nation.
"These crimes are happening with enough frequency that it has caught the attention of law enforcement, Realtors and lenders across our state," said Tom Farley, executive director of the Arizona Association of Realtors.
"Many Realtors are taking photos of the interior of the home as soon as they take a lender-owned listing to document the condition of the property in case of vandalism," Farley said.
Last week, the Maricopa County Attorney's Office announced five recent prosecutions of accused foreclosure strippers, including one involving a real-estate salesman.
Halferty said the task force hopes the information will educate owners of homes in foreclosure, neighbors and others that it is illegal to help themselves to fixtures and appliances in a vacant home.
"Take a look at Craigslist," Lincoln said. "It's full of things that have been stripped out of houses."
Halferty said Craigslist.org tipped the fraud task force to the extent of the problem.
"It is so blatant," Halferty said. "People would advertise that they were selling cabinets in a foreclosure sale."
Halferty said legally there should be no such thing as a foreclosure sale. The law states that anything attached to a home - stoves, cabinets, lights and ceiling fans - belongs to the property and stays there when it is sold.
Lincoln, who is based in Ahwatukee Foothills but represents properties all over town, said the problem is most widespread in Valley neighborhoods that were built during the housing boom a few years ago.
"Mature neighborhoods aren't seeing this as much as the newer neighborhoods in places like Avondale and Tolleson," he said.
While some homes are stripped by cash-strapped former owners, others are targeted by strangers.
Lincoln said one of his clients purchased a bank-owned house in Tolleson. Before it closed, thieves posing as pest-control workers broke in and removed $4,000 in appliances. The matter was reported to police, Lincoln said, but there has not been an arrest.
"Neighbors said two guys drove up in a white truck and said they were there to spray for bugs," Lincoln said. "What they really did was go in the backyard and bust a window to get into the house."
He said the deal still went through, but the family paid $6,000 less.
Talk to anyone searching for a deal on a house these days and you will hear similar stories.
"People are having to look at 20 or more houses before they find one that is suitable," said Jay Butler, director of realty studies in the Morrison School of Management and Agribusiness at Arizona State University at the Polytechnic campus.
"One of my students looked at 35. Doors are missing. Plumbing is gone. There is a huge secondary market for these things. People buy them and put them in their own homes."
In extreme cases, thieves rip copper pipes and wiring out of the walls, Baker said.
Nancy Nighswonger of Ahwatukee Foothills just wants to help her mother find a deal on a house for retirement. That might have taken a few weeks a couple of years ago.
"You would not believe the condition some of these places are in." Nighswonger said. "We've researched 100 houses and looked at 20 since June. All of them needed extensive repairs."
Getting financing to fix up damaged properties is not easy, Baker said.
"The FHA will not loan on a property that isn't fully intact," Baker said.
Struggling Valley homeowners left in limbo
The Arizona Republic - September 2009
Five months into the $75 billion federal program meant to toss a lifeline to homeowners facing foreclosure, most people in need of help are still floundering.
Overall, about 15 percent of borrowers across the country who are eligible for the program have been offered help from their lender, according to a recent U.S. Treasury Department report. Of those homeowners, 9 percent have participated in a trial loan modification. President Barack Obama's administration is calling for lenders to ramp up their efforts and help 500,000 more homeowners by November.
For homeowners facing foreclosure, the loan-modification process is slow, time-consuming and exhausting. Homeowners fall further behind as lenders, who say they are training more workers to handle the flood of requests, keep them waiting. Even when a loan modification is approved, some people discover the results are disappointing.
Thousands of Valley homeowners have experienced tough going with the program.
Cheryl Edgemon
Cheryl Edgemon was laid off from her longtime position as a legal secretary in April 2008. The 66-year-old has been looking for a new job ever since.
Savings, Social Security and unemployment benefits allowed her to scrape by at first. But in April, after a year of being unemployed, her savings were gone and she fell behind on the mortgage for her Glendale home.
Edgemon has contacted her lender multiple times, asking for a loan modification. Because she has income from her monthly Social Security check, she was told that she qualifies for a loan modification under the Obama plan.
"At first, they wanted me to be three months behind before I applied for loan modification," Edgemon said. "I can't understand why they would want me to ruin my credit first. I have worked hard to have good credit."
When she did fall behind, her lender offered to let her skip a few months and then make a balloon payment.
"How did they think I could afford a balloon payment? I just wanted them to extend the terms on my loan, drop my interest rate, something to help me keep the house," she said. "I will pay, but my Social Security is $1,244 and my unemployment is about to run out. I am trying to find a job, but it doesn't help to spend so much time trying to save my home."
She contacted housing groups and her congressman, asking for help. But her pleas for help weren't enough.
Edgemon's home was sold in a short sale a few weeks ago. She is now renting a house in her neighborhood for $500 less then her old monthly mortgage payment.
"It was going to be my retirement home," she said. "Not only did I not receive help, the people who I talked to at my lender were nasty and made the process harder than it had to be."
Kasey Broach
Kasey Broach applied for a loan modification right after the new plan was announced. She sent her lender documentation on her income and expenses, including a student-loan statement and bill for the homeowners-association fees on her Phoenix condominium.
Broach, a public-relations specialist for a Valley law firm, was required to show receipts on everything from groceries to doctor bills. Her lender also required her to meet with a loan counselor. The counselor recommended her for a loan modification.
Broach bought her condominium in 2006, at the peak of the Valley's real-estate market, right before she was about to start an MBA program.
She had a roommate who helped with the bills. But her roommate moved to New York last year, and Broach hasn't found another. Payments on her student loans started this year.
"When I purchased my home, part of the deal was that I didn't have to pay HOA fees until 2009," Broach said. "The condo is in a great location. I thought I would be able to easily sell it in two years, allowing me to pay off my student loans and never have to pay HOA fees."
Her HOA fees are $150 a month. Her student-loan bill is $250 a month. Overtime at her job used to supplement her monthly income, but that stopped with the recession.
Broach's lender promptly processed her paperwork and modified her loan. However, her new monthly payment is only $40 lower than her old payment, not enough to help her.
Because condo values in her complex have fallen, Broach can't sell and break even, so she is a considering a short sale or deed-in-lieu-of-foreclosure deal with her lender. A deed in lieu requires a borrower to give back a house to the lender. In exchange, homeowners take a slightly smaller hit to their credit than they would with a foreclosure.
"What bothers me most is that I didn't mess up and could not have seen this coming," Broach said. "I have worked full-time since I was 19. I bought a small condo, which no one would consider lavish. I have had great credit and paid my own bills my entire adult life. However, I'm still stuck in this position."
Rick Scott
Rick Scott asked his lender for help in October, before he fell behind on his mortgage payments. His annual income had dropped by $30,000. His roommate girlfriend was out of work.
Scott was trying to be proactive. He still had a job at Boeing, earning $50,000. But before the housing crash, he had also worked part-time as a loan officer. When that extra income stopped, he saw trouble ahead.
But the lender said he didn't qualify for help. He later fell behind on his $2,000 monthly mortgage payment and feared a foreclosure notice would come any day on his Mesa home.
When President Barack Obama announced the new loan-modification program in March, Scott immediately checked the details and found he was eligible. He faxed information on his income and bills to his lender, which told him he would have an answer in 30 to 60 days. By then, his savings were exhausted.
The foreclosure notice came several weeks later. He called his lender. The foreclosure was postponed for a month while his application for a loan modification was considered.
"So then I thought, OK, this is going to work, despite all the confusion," Scott said. "We are going to keep our home, and get a payment that's not more than 31 percent of my income like the program calls for."
Next, Scott received a Fed Ex package from his lender. Inside was a contract he was to sign that required him to pay half his current monthly payment for six months to show he could afford that amount.
"I happily signed the contract and sent them a check," he said. "A week letter, I received another Fed Ex with a letter saying congratulations, my loan modification is complete. Except the new contract called for me to pay $150 more than I was paying for my original mortgage payment. My payment went up."
Scott has an adjustable-rate mortgage. His lender proposed a fixed-rate mortgage, but at a higher rate, and would not lower the principal amount, so the monthly payment went up.
Scott asked again about a modification that would lower his payment. The lender said he could reapply, but consideration would take 90 days, and it might foreclose before that.
"I asked to speak to a supervisor with my lender's loan-modification department," Scott said. "I was put on hold and then disconnected."
Scott isn't sure whether he's going to apply for another loan modification.
Five months into the $75 billion federal program meant to toss a lifeline to homeowners facing foreclosure, most people in need of help are still floundering.
Overall, about 15 percent of borrowers across the country who are eligible for the program have been offered help from their lender, according to a recent U.S. Treasury Department report. Of those homeowners, 9 percent have participated in a trial loan modification. President Barack Obama's administration is calling for lenders to ramp up their efforts and help 500,000 more homeowners by November.
For homeowners facing foreclosure, the loan-modification process is slow, time-consuming and exhausting. Homeowners fall further behind as lenders, who say they are training more workers to handle the flood of requests, keep them waiting. Even when a loan modification is approved, some people discover the results are disappointing.
Thousands of Valley homeowners have experienced tough going with the program.
Cheryl Edgemon
Cheryl Edgemon was laid off from her longtime position as a legal secretary in April 2008. The 66-year-old has been looking for a new job ever since.
Savings, Social Security and unemployment benefits allowed her to scrape by at first. But in April, after a year of being unemployed, her savings were gone and she fell behind on the mortgage for her Glendale home.
Edgemon has contacted her lender multiple times, asking for a loan modification. Because she has income from her monthly Social Security check, she was told that she qualifies for a loan modification under the Obama plan.
"At first, they wanted me to be three months behind before I applied for loan modification," Edgemon said. "I can't understand why they would want me to ruin my credit first. I have worked hard to have good credit."
When she did fall behind, her lender offered to let her skip a few months and then make a balloon payment.
"How did they think I could afford a balloon payment? I just wanted them to extend the terms on my loan, drop my interest rate, something to help me keep the house," she said. "I will pay, but my Social Security is $1,244 and my unemployment is about to run out. I am trying to find a job, but it doesn't help to spend so much time trying to save my home."
She contacted housing groups and her congressman, asking for help. But her pleas for help weren't enough.
Edgemon's home was sold in a short sale a few weeks ago. She is now renting a house in her neighborhood for $500 less then her old monthly mortgage payment.
"It was going to be my retirement home," she said. "Not only did I not receive help, the people who I talked to at my lender were nasty and made the process harder than it had to be."
Kasey Broach
Kasey Broach applied for a loan modification right after the new plan was announced. She sent her lender documentation on her income and expenses, including a student-loan statement and bill for the homeowners-association fees on her Phoenix condominium.
Broach, a public-relations specialist for a Valley law firm, was required to show receipts on everything from groceries to doctor bills. Her lender also required her to meet with a loan counselor. The counselor recommended her for a loan modification.
Broach bought her condominium in 2006, at the peak of the Valley's real-estate market, right before she was about to start an MBA program.
She had a roommate who helped with the bills. But her roommate moved to New York last year, and Broach hasn't found another. Payments on her student loans started this year.
"When I purchased my home, part of the deal was that I didn't have to pay HOA fees until 2009," Broach said. "The condo is in a great location. I thought I would be able to easily sell it in two years, allowing me to pay off my student loans and never have to pay HOA fees."
Her HOA fees are $150 a month. Her student-loan bill is $250 a month. Overtime at her job used to supplement her monthly income, but that stopped with the recession.
Broach's lender promptly processed her paperwork and modified her loan. However, her new monthly payment is only $40 lower than her old payment, not enough to help her.
Because condo values in her complex have fallen, Broach can't sell and break even, so she is a considering a short sale or deed-in-lieu-of-foreclosure deal with her lender. A deed in lieu requires a borrower to give back a house to the lender. In exchange, homeowners take a slightly smaller hit to their credit than they would with a foreclosure.
"What bothers me most is that I didn't mess up and could not have seen this coming," Broach said. "I have worked full-time since I was 19. I bought a small condo, which no one would consider lavish. I have had great credit and paid my own bills my entire adult life. However, I'm still stuck in this position."
Rick Scott
Rick Scott asked his lender for help in October, before he fell behind on his mortgage payments. His annual income had dropped by $30,000. His roommate girlfriend was out of work.
Scott was trying to be proactive. He still had a job at Boeing, earning $50,000. But before the housing crash, he had also worked part-time as a loan officer. When that extra income stopped, he saw trouble ahead.
But the lender said he didn't qualify for help. He later fell behind on his $2,000 monthly mortgage payment and feared a foreclosure notice would come any day on his Mesa home.
When President Barack Obama announced the new loan-modification program in March, Scott immediately checked the details and found he was eligible. He faxed information on his income and bills to his lender, which told him he would have an answer in 30 to 60 days. By then, his savings were exhausted.
The foreclosure notice came several weeks later. He called his lender. The foreclosure was postponed for a month while his application for a loan modification was considered.
"So then I thought, OK, this is going to work, despite all the confusion," Scott said. "We are going to keep our home, and get a payment that's not more than 31 percent of my income like the program calls for."
Next, Scott received a Fed Ex package from his lender. Inside was a contract he was to sign that required him to pay half his current monthly payment for six months to show he could afford that amount.
"I happily signed the contract and sent them a check," he said. "A week letter, I received another Fed Ex with a letter saying congratulations, my loan modification is complete. Except the new contract called for me to pay $150 more than I was paying for my original mortgage payment. My payment went up."
Scott has an adjustable-rate mortgage. His lender proposed a fixed-rate mortgage, but at a higher rate, and would not lower the principal amount, so the monthly payment went up.
Scott asked again about a modification that would lower his payment. The lender said he could reapply, but consideration would take 90 days, and it might foreclose before that.
"I asked to speak to a supervisor with my lender's loan-modification department," Scott said. "I was put on hold and then disconnected."
Scott isn't sure whether he's going to apply for another loan modification.
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