Rob Bohr – Arizona Realty One Group

What is a Comparative Market Analysis (CMA) and how can it be a helpful tool for you? A CMA is an estimate of what a property is worth based on the current market value of comparable properties. A CMA is not an appraisal and should not be treated as such. A CMA simply gives you an idea of what a home should be selling for based on current market conditions. An appraisal, on the other hand, is an actual statement of value and can only be conducted by a licensed appraiser.

A CMA can be a very useful tool for any homeowner or any prospective buyer. Whether or not you are looking to sell, a CMA can provide a homeowner with an idea of the value of his or her home so they can better explore their options. If an individual has already decided on selling his or her home, then a CMA will be necessary for setting the list price of that home. A prospective buyer should have a CMA completed on any property of interest in order to determine if the list price is appropriate.

There are several factors that determine the strength of a CMA. In order for the analysis to be accurate, the CMA must be as current as possible. You do not want to base the value of a home on a CMA that was completed one year ago because the price simply will not be accurate. You must have a current analysis completed, and that analysis needs to be completed using comparable properties that have sold as recently as possible. As a rule of thumb, anyone completing a CMA should not use a comparable sold property that closed more than three months ago. A CMA can use comparable properties that have been sold, are active listings, or are expired listings, but of the three groups the recently sold listings will be the most effective comparison.

You want the characteristics of the comparable properties to be as similar to your subject property as possible. This includes the location, size, the number of stories, number of bedrooms, number of bathrooms, and many other characteristics. You will want to be as thorough as possible when giving the details of the subject property in order for the CMA to be accurate. If there is a difference between your subject property and the comparable, then your agent should be able to adjust for that difference in the CMA.

For instance, if you have a pool and you are using a comp that does not have a pool to determine your value, your agent will be able to add the estimated value of a pool to the comp to determine the value of the home. Of course, it would be easier to simply use a comp that has as many of the same characteristics as possible, but that may not always be feasible.

Whether you are looking to sell, looking to buy or are just curious about the value of an Arizona property, I can run a CMA for you today. Just enter as much information as possible on my FREE C.M.A. Request and I will contact you within days with a completed CMA that can give you a good idea of the market value of the property.

Short sales and foreclosures have become extremely popular terms lately. In fact, nearly half of all listings in Arizona right now are distressed properties. Whether you work in the real estate industry, are looking to buy, or want/need to sell a home, you have heard these terms a lot lately. As much as they are used, you may not know exactly what they mean. In this article I will discuss what a short sale is, how it compares to a foreclosure and what that means to you.

A short sale is when an owner of a home negotiates with the lender that holds the mortgage to “forgive” a portion of their debt on that home in order to avoid foreclosure. For instance, let’s say you owe $300,000 on your home, but the current market only demands $220,000 for it. You may try to sell that home for $220,000 if the lender will agree to take less than what the original loan amount was for. The lender will typically agree to do this when the seller can demonstrate some type of financial hardship, like if someone has lost their job.

Whether you are trying to buy or trying to sell, there are many drawbacks to a short sale. The biggest of these is time. Everyone’s million dollar question is, “how long will it take to close on a short sale?” The honest answer to that question is, “I have no idea.” It could be a long time. Many people say three to four months is the time expected to close on a short sale, but the truth is it can be much longer than that. There are many horror stories out there from people who waited for nine months or longer to find out that the bank rejected the sale or did not approve the price.

There seems to be some fundamental problems with the whole process and, in my opinion, reform is necessary. For one thing, the realtor and the seller set the list price of the home. The lender does not approve that price on the front end. Therefore, someone can offer full list price and the lender, after having it sit on their desk for months, can decide they are unable to sell it at that amount and cancel the deal.

Please, don’t think I’m just blaming the lender here. As they say, “Don’t hate the player, hate the game.” As a matter of fact, individuals in the real estate industry are also guilty of questionable activities. Agents, who are hired to represent the sellers, seem to be sometimes confused about their role. Normally, when an offer is submitted and accepted the seller, an agent will place an AWC contingency on that listing. This means that this offer is being entertained and, even though the listing is still active, all other offers will be secondary or back up listings. What we often see happening with short sale listings is that the agents are not placing this contingency on the listings hoping that more offers come in that will be more desirable to the lender. Again, this seems to be a problem with the overall system.

There are many short sales listed right now and if you are looking to buy a home, you will undoubtedly come across some that you are interested in. I am not saying that you should not consider those homes, just know what you are getting into. If time is of the essence, a short sale is not for you. If you are looking for a property at a good price as an investment and do not care about the time it takes to close, then a short sale could be ideal.

Short sales are not the same as foreclosures. Foreclosures are bank owned properties or REOs (Real estate owned) as they are often called. These are houses where the owner defaulted on the loan and the lender took possession of the house. Bank owned homes are not as much of a headache as a short sale, but they can still take longer than a traditional transaction and there are some things that you will need to be aware of. You do not have to worry about the bank deciding that the list price is not enough, because in a foreclosure, the house is actually listed by the bank so the amount has already been approved. This will reduce the time it takes to close, however, you are still dealing with a lender rather than a traditional seller so they can take longer to go through the process.

Another concern with foreclosures is the condition of the property. One thing that we have found in the Phoenix area (and I’m sure is common in other areas too) is that people destroy houses when they are forced to leave. Many people strip the homes of anything functional and others purposely cause serious damage. I’ve heard stories of people pouring concrete down their drains before they left. You will absolutely need to have a professional inspection done before purchasing a foreclosure, because pretty much any bank will require a buyer to purchase the property with an “As-is addendum.” Meaning that they are agreeing to purchase the property in the condition it is in.

Those are some of the major issues and concerns with short sales and foreclosures. There are more, but I don’t get paid by the word. However, I would be happy to discuss this information with you more thoroughly. Just send me an email or give me a call at 602-478-7015 if you have questions. Keep an eye on upcoming articles about distressed properties and the steps for selling your home as a short sale.