One of my pet peeves is that the Pima County Assessor’s Office is notoriously quick in raising Property Values to reflect an appreciating market, but equally as slow to lower them when the land market declines. Thus, many owners of vacant land still have inordinately high tax bills in comparison to the current value of their property.This is particularly true if an owner doesn’t file an annual tax appeal with the Assessor.

For landowners who didn’t file an appeal earlier this year directly to the Assessor’s Office, there is one final chance to appeal your 2011 property value. A direct appeal must be filed by December 15, 2010 to the Arizona Tax Court . If your property is valued over $1,000,000 the appeal must be filed in Phoenix and is too complicated for most individuals to handle themselves. My recommendation is to call Sage Tax Group (or a comparable tax service) and have them file on your behalf. There is no cost to the landowner unless they successfully get your value, and thus your taxes, lowered. If your property is valued at less than $1,000,000 you can file a claim yourself in Small Claims Court in Tucson that is specifically designated for tax appeals. Forms are available to do this on The Assessor’s website at www.asr.pima.gov.

If you haven’t yet worked on your taxes, DO IT NOW. If you don’t make the effort, please NO COMPLAINING.

While recently co-teaching a Land Class I was once again reminded about the potential perils and problems that often surface when purchasing unsubdivided parcels of vacant land. Subdivided property is simply land that is part of a County approved and platted subdivision and with that comes some important assurances to a buyer. The developer has hired engineers as part of the platting process who have studied, solved and gotten County approval for issues such as floodplains, erosion hazard setbacks, hillside development zones, conservation and natural open space areas, easements, utility availability, ingress and egress, septic locations, etc. Taking into account the natural environment of the land as well, a buyer is assured that there is an actual place to build on the lot.

With unsubdivided land, nothing is predetermined for the buyer who must answer the questions on all the above issues him/herself during a due dilligence period of the contract. In addition to the assistance by a Realtor with knowledge of the pertinent issues, a buyer’s single-most important document with unsubdivided land is an ALTA survey. Costing roughly 50% more than a standard survey, this will take all of the items of record from a Title Report and plot them on the survey along with the standard boundary information. Additionally, it will find and record encroachments, utility locations and neighboring properties. This tool is well worth the extra cost to determine the availability and location (and subsequently the cost) of a buildable area on an unsubdivided lot.
Some of the most beautiful and private land in Pima County is unsubdivided property and thus is well worth the time, effort and cost in researching it’s “buildability”. However, as Sargeant Phil Esterhousen on Hillstreet Blues used to say to his officers before sending them out to the streets, “Be careful out there”.

Well we have a new word that has been brought to the forefront in the latest bad news related to foreclosures and the Real Estate Industry. It is “robosign” . A reference to having a robot rather than human, automatically complete paperwork in production line like fashion. This is the practice, apparently in place at most of the large lenders in this country. It seems Ally Financial, which operates GMAC Mortgage, JPMorgan Chase, PNC Financial and Bank of America all have personnel sign foreclosure documents without actually reviewing them for accuracy. Obviously done to save time, reduce payroll, speed through the process to get these assets off their books and thus add to the lender’s bottom line profit margin, expediency has strongly trumped integrity and intelligent business practice. And by the way, there seems to be lots of mistakes in the documents that go unnoticed and uncorrected because of this practice- like no proof that the lender is the legal holder of the mortgage or that the borrower is in default or inaccurate and undocumented dollar amounts.

I’m not suggesting, as some have, that this is a conspiracy to take people’s property away unfairly. In the great preponderance of cases, I believe that these are legitimate foreclosures where borrowers over their heads and under water, cannot afford to stay in their homes. But I find it incredible that the largest and most technically sophisticated lenders in America, who scrutinize borrower’s applications with a fine tooth comb, have become so greedy in their vision and sloppy in their practice that all 50 states are now participating in investigations of these mishandled procedures. And my biggest fear is that this could take months or even years to sort out and that foreclosure proceedings, which have already been halted, will not begin again until that happens. If that’s true who knows how long the real estate recovery will be put off.

The Realtors Land Institute will be holding a meeting on November 5, 2010 from 9 am – 12 noon. They will be discussing water resources and policies in Tucson and beyond. Topics to include: Water Rights, Endangered Species, Water Markets and Climate Change.

For the registration form and more details, download the flier.

Since my last post, Mutual of Omaha Bank has finalized the price and terms of their new lot loan program. The good news is that it’s better than originally reported. With between 20%-30% downpayment, dependent upon a borrowers credit profile, they are offering a choice of 3 or 5 year balloon loans. A borrower can also choose the amortization which ranges from 10 years to 30 years. The interest rate will vary depending on the terms chosen but currently ranges from 5.25% to 6.50%. Relative to other available lot loans, these are reasonable rates. As a reminder, this is only available to borrowers planning to build a custom home and not designed for the Investor market.

I’d also like to correct the description of National Bank of Arizona’s land loan program. They are currently offering a 15 year amortization, with 25% downpayment, 5 year balloon at 7.25% interest rate.

On Friday, I learned of a new land financing product that is now available in Tucson. Mutual of Omaha Bank, yes the same company that we think of for insurance, is offering a lot/land loan with 20% down, 20 year amortization and a 2 year balloon payment. There is some flexibility as it can be structured as either an interest only loan or with conventional principle and interest payments. According to Jim Roberts, the Mortgage Banker in charge, the current interest rate is 4.5%. This loan is not available to Investors buying land for speculation, instead, has been designed for borrowers interested in building a custom home within 2 years. Thus, the loan will be paid off by taking out a new construction loan. The construction loan can come from any lender, not just Mutual of Omaha.

This is a MAJOR development in what currently is a pretty bleak market for Tucson land loans. The only other products available are Washington Federal’s 20 year fully amortizing loan with 30% down at 8.75% and National Bank of Arizona’s 15 year amortization, 5 year balloon, with 30% down at 7.50% (please call the lenders to verify the current rates and terms).

Its been several years since we’ve had a lot loan with a rate comparable to a residential mortgage, and although this is not available to Investors and has a short payback term, it is a sign that at least one lender is expecting growth in Tucson’s custom home development market. I certainly hope other lenders will follow.

The land sales that are taking place today, and there are quite a few, are those that are aggressively and realistically priced. Some seller’s believe that their property has fallen 20% in value since 2005 or 2006 but in reality that number is closer to 50 or 60% and sometimes more. And unfortunately, that is true for pretty much the entire Tucson Land Market. When a market is trending downward, you not only have to price aggressively but have to price WELL BELOW current value to induce buyers to act now rather than wait for further, expected reductions. You have to leap frog below current value. Every day in the MLS system there are between 3 and 10 price reductions on land and virtually no price increases. Seller’s are trying to find the price point that will create a sale.

For example, in the MLS today, a 4 acre, custom parcel with all utilities on the southwest side that was bought for $150,000 in 2005 was reduced to $65,000. It was priced at $95,000 with no activity but now I think it will sell. Also, a gated 4 1/4 acre parcel at Butterfly Mountain (a high end Tortolita Mtn. Subdivision) which was purchased for $299,000 in 2005 was reduced to $129,000. That’s an aggressive, and what I believe, an appropriate price to create a sale in short order. I also noticed that a 1 acre lot in Coyote Ridge, an Oro Valley subdivision, that was bought for $340,000 in 2005, sold for $146,000.

Seller’s must look at the facts and Realtor’s must know how to find and present them.

I’m intrigued by the recent story of Steven Slater, the Jet Blue flight attendant who lost control when he was treated rudely and crudely by a passenger and slid down the plane’s emergency slide after cussing the passenger out over the plane’s P.A. system. Although he is potentially being prosecuted for his actions (which we know will never go to trial) he has garnered sympathy and support from over 100,000 (and growing) Facebook fans who in this frustratingly long and deep economic recession would love to voice their job frustrations, but fear recrimination and job loss as the result.

I’m surprised we haven’t seen this story before, with a Realtor being the culprit and losing it. After all, since 2006, how many times have we opened an escrow only to have our Buyer want to renegotiate the terms or price due to the declining market and then back out of the deal? How many “discussions” have we had with our Sellers about lowering asking prices yet still can offer little hope to them of selling their property? How many lenders have we seen exit the market making financing difficult or near impossible for anyone other than the most stellar? How many “commission conversations” have we had with our Seller’s being concerned, understandably, about their shrinking bottom line? How much more time is everyone spending and making how much less income? How many times have you heard agents say “this isn’t fun anymore”? How many of our friends and colleagues are no longer in our offices or even the industry? Well anyone in the business could go on and on with this list.

I can think of some pretty mischievous ways to go “Slater” but it probably wouldn’t change anything. I guess I’ll just have to enjoy the fantasies.

According to Realty Trac Inc.( probably the most well known company that monitors the U.S. foreclosure market), more than 1 million American families may lose their homes to foreclosure by the end of the year 2010. They also mention a “huge backlog” of looming foreclosures that Bank’s are working their way through. These are what are called “shadow foreclosures” . I’ve not seen recent statistics as to the number of these or when they are projected to come out of the “shadows” and become actual foreclosures. The startling thing about this number is that ,according to Realty Trac, nationally, lenders have been foreclosing on approximately 100,000 homes per year. Ten times the most recent average year is a huge increase. The States with the largest number of these are no surprise: Nevada, Arizona, Florida, California and Utah.

For Tucson this means that we will continue to see a large proportion of all sales be REO assets. In my personal Land Business, REO’s account for about 75% of my 2010 sales.To best serve our clients we should also monitor the problem assets that potentially could become foreclosures as they represent excellent opportunities for investors and end users. Short sale staff at many Banks have recently become noticably more aggressive in selling properties before they become foreclosures. Buyers need to position themselves to be able to quickly take advantage of any properties that meet their criteria. Do this by prequalifying for financing, increase the availability of cash and seek out an agent that is attuned to this segment of the market.

While sitting on a Professional Standards Arbitration Hearing last week, some of my colleagues mentioned that some Phoenix area Realtors recently got in trouble from participating in a practice called ” Flopping” while selling short sale properties. Not hearing this term before, I was surprised , a couple of days later, to see a reference to a Bloomberg Businessweek Article describing the prosecution of 2 Realtors in Connecticut for short sale fraud for this same practice. Flopping, as it turns out, is the fraudulent practice of persuading lenders to approve the sale of property substantially below the balance owed without disclosing the fact that there are buyers waiting in the wings willing to pay more for the same assets. A closing takes place and the property is immediately flipped to the new buyer at a hefty profit. There is an important distinction to be made as there is nothing illegal about buying an asset from a lender , putting it back on the market and eventually reselling it at a profit. Many Investors are taking advantage of this market in that way. I believe its also an important part of quickening the recovery as we must sell these distressed assets before we can return to a more normal real estate market. The illegal act comes however by the concealment to the lender of a subsequent buyer at a higher price being lined up ahead of time. Obviously, a buyer , with the help of a Realtor, trying to convince a lender of a particular value, while knowing that value is lower than a true market value based on a waiting purchaser is unethical, illegal and should be prosecuted.