November 2018 Phoenix Real Estate Report

phoenix real estate market updateHighlights of my November 2018 Phoenix Real Estate Market Report:

1. How fast are homes selling? Average number of days on market for homes sold is 60 (down 5 from last year)
2. How many homes are for sale? We currently have 19,654 properties for sale (down 4.5% from last year)
3. What is the average sales price? Homes across the valley are selling for $326,100 (up 9.8% from last year)

The Phoenix real estate market has been very good to homeowners for many years and we are still on an upward trajectory that started a long while back. October’s supply (measured by homes listed for sale last month) was down 1.4% from October 2017 and October’s demand (measured by homes sold last month) was down 1.2% from October 2017. Since the rate of drop in demand was essentially the same as the drop in supply, we would expect home values to be flat of late – which they have been and will likely remain so through the holiday season that is upon us. There is good news however: home values have still risen almost 10% on average in the past 12 months but our current market absorption rate has spiked to 2.43 months (keep in mind, lower is better if you are selling) from under 2.2 months not long ago. Absorption rate means that if no additional homes were listed for sale, it would take 73 days for every home listed in the valley to sell, based on current level of demand. Last year it would have taken over 78 days to absorb every home offered for sale in Phoenix, so we are still better off in theory than a year ago. A seller’s market is said to occur when absorption is below 3 months and a buyer’s market is when it is over 5 months. When absorption is between 3 and 5 months, it is deemed to be a balanced market favoring no side in particular.

Curious about your current Phoenix home value? Ask me for your Phoenix Property Value report created especially for your home and emailed to you within 24 hours. It is filled with local market data, demographics, pricing trends, your home’s estimated value and my confidence rating.

Realistic pricing and professional photography to showcase a property are essential in maximizing value and minimizing time on market. Ask about my written guarantee to sell a home within 67 days at a price acceptable to the owner or they get $1,000 from me at closing.

Real Estate Negotiating

Real estate negotiating
If you prefer buying real estate without an agent (who will watch your back every step of the way at no cost to you), you may wish to consider these real estate negotiation strategies to help you land the best deal:

– offer higher earnest money over and above the typical 1% of sales price; as long as you don’t plan to breach the purchase contract rules, the earnest money is just going toward your total down payment anyway.

– let seller choose the title/escrow company; it could create the illusion of seller controlling the deal but in reality most people couldn’t name a title/escrow company off the top of their head.

– be flexible on the closing date, if possible; let them know you can move closing forward (check with your lender to be sure they can make good on the desire to close sooner) or backward to suit their schedule.

– offer to allow seller to rent home back from you for a few days to help them move to their next home; moving is very stressful but this will give seller so much peace of mind and you will even make a few dollars.

– ask seller to buy you a home warranty – or to leave some item in home with the sale – that you are comfortable negotiating away later; meaning you didn’t really want this anyway but seller thinks they scored a win.

– ask for slightly more closing assistance to be paid by seller than you actually need or can use (if you are asking for any financial help from seller); if you only need 2% help, ask for 2.5% and negotiate it away.

– give seller ample time to respond; it is customary to give 48 hours for review of your offer but I can’t tell you how many times I get an offer at 7pm and buyer expects a response from seller by noon the following day.

Notice property price is not mentioned here. Remember, when buying and selling real estate, it is an often emotional process that can cause otherwise rational people to behave irrationally and out of character.

Solar Panels

Solar Panels in Phoenix
Want to make your home easier to sell? Don’t install a solar system in Phoenix. As an real estate agent, I am often asked by homeowners who are considering adding a solar system whether or not it will have any impact on their home value. Most are surprised to hear me say, in the absolute best case scenario it will not hurt your home’s value and in most cases it will be a negative to future buyers considering your home for purchase.

With all the full sun we get (over 300 days a year), why not install solar in Phoenix?

1. It’s leased so any buyer of your home will need to qualify for assuming the balance of your lease. Solar leases work just like car leases – except car lease payments don’t rise every year on you.
2. It often can damage roof at time of install. I have seen several instances of damage to tiles and flashings, not to mention the need for installing a pigeon/bird net under the panels to stop them nesting.
3. It voids your manufacturer warranty on roof tiles (usually lifetime). Plain and simple, if you install solar you lose your tile warranty against manufacturer defects.
4. It’s hot! Most people don’t realize solar panels feed an inverter in the garage to produce energy and this generates heat. Stand in a closed garage in summer with solar and you’ll see.
5. It doesn’t generate enough power to be off the grid. Most systems on a typical home max out at 9kwh production, which may be just enough to cover power use in winter but leave you a big summer electric bill.
6. You will never own it, even after you make 20 years of lease payments. So after making 240 payments what is your reward? They show up to take the entire system off your roof and promise to fix any damage.
7. The lease payments rise every single year, on average 2.9% compounded annually. To put that in perspective, this increase has been 41% higher than the annual rate of inflation the past 20 years.
8. It’s unproven long-term. What about the company’s chances of being around for the next 20 years? If they disappear, who’s going to repair it when a panel fails? And wow are these things unsightly!
9. What happens when you need to re-tile (and change the weatherproof underlayment) or re-shingle your roof? You must pay the company (assuming they still exist) to remove the panels, store them and then re-install them so you can fix your roof.
10. All else equal, when two homes have identical features, I’ve never met a buyer who prefers the one with solar. The reasons are probably all of the above.

What are the tangible, measurable and direct benefits to a homeowner installing solar in Phoenix?

1031 Exchange

1031 Tax Deferred Exchange
What is a tax-deferred exchange? Also known as a 1031 exchange, a tax-deferred exchange allows real estate investors to delay paying capital gains taxes on sale of investment property as long as conditions are met.

To take advantage of a 1031 exchange in Phoenix, an investor must purchase qualifying property which is of like-kind to the property being disposed of. Does this mean if you sell a strip mall, you must buy another strip mall? NO!

Like-kind property in a 1031 exchange is broadly defined by the IRS, which is great news for investors, such that all US real property is like-kind to all other domestic real property. Here are examples of qualifying properties that can be exchanged:
Raw land or farm land for improved real estate
Residential, commercial, industrial or retail rental properties for any other real estate
Rental ski condo for a 3-unit apartment building

According to the IRS, relinquished and replacement properties must be held by the 1031 exchanger either for investment purposes or for productive use in business.

Timing in a 1031 exchange is very important, so an investor must identify the like-kind replacement property within 45 calendar days of selling their current property and close on the replacement property within 180 calendar days of selling current property.

Be sure to avoid boot, which typically refers to the 1031 exchangers cash proceeds left on hand after the exchange. This occurs when the replacement property is bought for less than the proceeds from sale of the relinquished property and boot is subject to capital gains tax. To avoid this simply purchase like-kind replacement property with a value equal to or greater than the value of the relinquished property.

As a realtor, I have completed 1031 exchanges with my clients and due to the complexities of closing a successful 1031 exchange, I am often asked for a recommendation: IPX 1031 as a highly-qualified intermediary to handle your tax-deferred exchange anywhere in the US.

Stigmatized Property Law

AZ Stigmatized Property LawSellers in Arizona are protected by the Stigmatized Property Law which states:

“No criminal, civil, or administrative action may be brought against a transferor or lessor of real property or a licensee for failing to disclose that the property being transferred or leased is or has been:
– The site of a natural death, suicide, or homicide, or any other crime classified as a felony
– Owned or occupied by a person exposed to the human immunodeficiency virus, or diagnosed as having the acquired immune deficiency syndrome, or any other disease that is not known to be transmitted through common occupancy of real estate
– Located in the vicinity of a sex offender
Failing to disclose any fact or suspicion noted above shall not be grounds for termination or rescission of any transaction in which real property has been or will be transferred or leased.”

This AZ stigmatized property law has been interpreted by legal counsel to indicate there is no obligation for seller to disclose:
– a natural death, suicide, homicide or felony occurred on the property
– it was occupied or owned by a person with HIV or AIDS or any other disease that cannot be transmitted by living in the same property
– a sex offender lives in the area

Currently, all other material facts and latent defects are required to be disclosed by seller. A material fact is something that a reasonable person would deem important in making a purchase decision. A latent defect is an issue that may not be immediately noticeable or seen at all.

RE/MAX Renaissance Realty
9059 W Lake Pleasant Pkwy #B200
Peoria, AZ 85382