Buy Tucson Lots

Finally Some Good News on Financing Land

admin — Mon, 23 Aug 2010 18:36:12 +0000

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.

Re-educating Seller’s is the Only Way to Sell Land

admin — Fri, 20 Aug 2010 15:39:16 +0000

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.

Going “Slater” – a Realtor’s Fantasy

admin — Thu, 12 Aug 2010 17:59:04 +0000

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.

Are Foreclosures Coming to an End? Hardly.

admin — Fri, 16 Jul 2010 19:21:42 +0000

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.

Flopping vs Flipping: Investors Beware

admin — Thu, 08 Jul 2010 16:22:13 +0000

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.

Is a “double dip” in the economy coming?

admin — Fri, 25 Jun 2010 14:19:45 +0000

I certainly hope not but it seems recently that the mood of people that I interact with is taking a slightly downward, more negative turn. I’ve recently heard about continued job strife, stock market uncertainty, more pending “shadow” and actual foreclosures( shadow foreclosures are assets that Bank’s are taking back but don’t yet want to put back on the market for fear of overwhelming the market) , real estate values continue to slip and people still have little confidence to begin increasing their personal spending habits. On the other side there are a couple of brighter spots such as “move-up” builders actively buying more finished lots to construct homes in the $250,000 – $ 400,000 range and seeing strong activity in the sale of foreclosed lots and homes by both investors and end users. Its confusing as the signs seem to be mixed right now.

As intrinsically an optimist, most salespeople are, I’m holding out hope that things will slowly start to change toward the positive. What a great time for some good news from our Government; either locally or National. Come on elected officials; pose some solutions, find some answers. As we say in real estate circles; we’re ready , willing and able.

Builders are Coming Back into the Lot Market

admin — Tue, 15 Jun 2010 21:49:44 +0000

Lo and behold, in the past couple of weeks I’ve received calls from local, Semi- Custom Home Builders who are actively looking for groups of finished lots on which to start construction. Although we’re not yet talking about higher end, custom home builders; the builder’s who are ramping up are serving the move up buyer. Specifically, they’re looking for land to support 1800-3000 sq. ft. homes with beginning prices in the high $200’s that will reach into the upper $400’s with added upgrades and lot premiums. To reach an acceptable profit margin, they will pay from $60,000 – 80,000 per lot. Additionally, they are expecting to purchase the lots on a rolling option basis. This is a structure that allows a builder to purchase a large group of lots at a predetermined price but actually close on them in a gradual way over an extended period of time.Thus allowing the Builder to purchase lots from the proceeds of sales and limiting the amount of money they have to borrow. As example, I’m working on a deal where a builder will contract for 20 lots with the first of those to close this August. They’ll immediately build a model home on it and begin their marketing program. They’ll then be required to , at minimum, buy another lot in February of 2011 and every 60 days thereafter. A structure that becomes a win- win for all parties; Builder, Developer and underlying Lender.

It’s a very positive sign that the lower to middle end of the new home market is becoming active again. If interest rates stay at or near the current record lows, I think it will only be a matter of time until we’ll see this trend continue and move into the higher end , custom home segment as well.

Federal Regulations and the flow of Land Foreclosures

admin — Mon, 17 May 2010 15:03:12 +0000

In the past couple of weeks I’ve experienced three, seemingly unrelated events that may actually be related. I’m not yet sure what , if anything these may signal but perhaps time will tell. The first was my reading a couple of articles indicating that Federal Regulators are getting tougher on Banks and scrutinizing more closely their assets, securities, practices, loans, etc. Secondly, I was working on two transactions whereby M&I Bank was negotiating discounts on non-performing ,land secured, loans to induce the sale of these assets to individual buyers. Abruptly, the negotiations were put on hold because, we were told , the FDIC was at their offices for an extended period of time and they would be focusing on internal issues for perhaps the next 45-90 days. Finally, I’ve noticed a distinct change in attitude about selling REO Assets from one of my client Banks. They have recently become more motivated, and thus aggressive, about pricing and selling their vacant land properties. A year ago they took the position that they were satisfied, if need be, to ride out the market and wait until their Tucson Land regained a good deal of it’s value before selling it. That seems not to be the case anymore.

Are banks pushing harder to get back to normalcy by moving out REO’S? Are the Feds more concerned than we know about the amount of bad loans out there? Do we have a lot more or a lot fewer land foreclosures than last year, still in the pipeline? The answers to these and so many other related questions are not clear to me. But it sure is an interesting time in Real Estate.

Vacant Properties in Tucson: How many are there?

admin — Mon, 10 May 2010 22:52:53 +0000

I was asked some interesting questions by a Senior Officer of a local Bank the other day. She wanted to know how many finished, custom lots we have throughout Metropolitan Tucson, priced at $200,000 and above. It turns out that there are currently 695 available lots in this category. I then was asked how many have sold in the last year and how many new custom homes are being built on these. Well, the first question was easy to research; a total of 56 lots above $200,000 market-wide have sold in the last year. Interestingly, they ranged in price from $200,000 to $1,350,000 but had an average price of only in the high $200’s.Clearly, the great majority of “high end” lots are selling under $300,000 with a large cluster just above $200,000. In looking at new construction stats for the past 12 months; 134 homes have sold with the great majority of these being production homes on small lots. In breaking these down, only 9 of the 134 were built on lots located in custom home subdivisions; under 7% of the total.

So, there is a several year supply of custom lots out there; you better be priced between $200,000 and $300,000 to have a chance to sell, and the Builders and Architects specializing in custom homes still have plenty of time on their hands.

Foothills Homesites: How much value have they lost?

admin — Tue, 20 Apr 2010 16:10:06 +0000

In the past year or two I’ve been repeatedly asked how Foothills Lots values have faired in comparison with those in other areas. It also raises the question of where the values are now in relation to the highs of 2006/2007. Several trends have been clear during this downturn: There has been continued demand and sales of the lower priced Foothills lots and Land (the Best values in the Best areas are always ahead of the norm); Foothills homesites have not experienced as severe a drop in value as some other areas; there have been very few foreclosures among foothill’s subdivided parcels thus we haven’t seen whole subdivisions being dragged down as we’ve seen in areas such as Stone Canyon , Saguaro Ranch; there is at least one subdivision, Pima Canyon, that has bucked the trend and remained relatively strong thru the downturn.

I had a conversation yesterday with the Assessor’s Appraiser responsible for the Foothills area. After going through numerous examples, of vacant parcels that sold in 2006/2007 and resold in 2009/2010, a trend became clear. The staff member concluded that lot prices were off about 25% from the market highs of a couple of years ago. I think that number may be a bit conservative, but not far off.

The values of the highest end lots( those above $1 Million) have probably dropped 30+% but in general I concur with the Assessor on this. In other areas I ‘ve seen that number as high as 50 % and even 70% in some extreme examples. I’ve always thought that the most desirable locations tend to hold value more than lesser areas and I think the Foothills Lots example supports this notion.