There were just shy of 200 visitors here yesterday and the vast majority were looking for information about the City of Phoenix’s $15,000 incentive for home buyers purchasing a bank owned home.
For those who still question the idea of latent buyers’ demand in the Phoenix real estate market, consider those searches as Exhibit A. Tell people they can purchase a home and get money for doing it and they come out of the woodwork.
Except it’s not that simple …
There’s no free money here. The $15,000 is a loan that must be repaid when the home either is sold or refinanced. So the piper will be paid, just not now.
The money only can be used toward down payments and closing costs. I can’t get a buyer down payment assistance these days, but closing costs? I’ve either closed or have escrow open on four bank owned properties since the first week of February. I’ve successfully negotiated closing cost assistance on three of the fourth – the fourth buyer didn’t want any and had to “settle” for purchasing a home in Surprise at 88 percent of list price.
In short, people using this money are taking a loan to pay what the bank might already pay … and you don’t have to pay the lender back when they pay closing costs.
Going back to the home my buyer purchased at 88 percent of list. That was a heck of a deal, all in all. And it wouldn’t be enough to qualify for the loan since the property has to sell for 85% of appraised value or less. So assuming a bank has aggressively priced the property, they’re going to have to give another 15% for the buyer to get the loan.
Let me tell you from experience, that’s going to be a bear of a hurdle for anything that’s been on the market for 30 days or less.
And that’s where I see the biggest issue with this program … it only applies to bank owned homes, the same bank owned homes were there’s less than three months of inventory Valley wide. The Phoenix bank owned market is a sellers’ market but some of the needed contingencies assume a buyers’ market. That’s just not the case.
I’ve told sellers for ages that they need to compete on price with foreclosures if they expect to sell in this market. But that’s no longer the case in the city of Phoenix because the City of Phoenix has further slanted the playing field. And it’s being slanted not toward those folks who have made payments all along but toward the fastest-moving segment in the Phoenix real estate market.
If I were a homeowner trying to sell my house in Phoenix, I’d be pissed. And if I were a buyer who took the loan and signed up to repay what they could have gotten from the bank because they either didn’t know or didn’t work with someone who knew, I’d be pissed as well.
Sadly, more and more government efforts to “help” seem to end in just that way – with pissed off people.
[tags]Phoenix real estate[/tags]