Saturday, September 18, 2010

Historical Phoenix, AZ Homes Information and Links to Free MLS Searches: THE TRUTH ABOUT SHORT SALES, STRATEGIC DEFAULTS, AND WALKING AWAY

Historical Phoenix, AZ Homes Information and Links to Free MLS Searches: THE TRUTH ABOUT SHORT SALES, STRATEGIC DEFAULTS, AND WALKING AWAY



These days, all sort of experts are giving advice about the merits of defaulting on your mortgage and walking away from your home because the value on your property “dropped” and it only makes “good business and economic sense” to “give the house back to the bank”.  Many of these “experts” are the modification companies and/or modification attorneys who are charging a fee for their service to walk you through the process.  Here are the top 4 myths and facts regarding this:

1.       Myth:  “I am getting even with my bank who screwed me over with this predatory mortgage.  This will teach them a lesson.” 

Fact:  Most mortgages today are not owned by your bank but rather Fannie Mae, Freddie Mac, or FHA.  Your bank who you pay every month is probably only the “sub-servicer” or servicer for Fannie Mae, Freddie Mac, or FHA.  What this means is your bank receives a fee to collect payments from you on behalf of Fannie Mae, Freddie Mac or FHA.  They do not, however, own your actual mortgage.  When you stop paying, instead of hurting your bank, you are actually INCREASING their profits.  Remember, they get paid a fee to service your mortgage no matter if you pay or not.  When you default, they are allowed to collect additional fees for legal expenses, property inspections, appraisals, etc.  Most banks own and profit from the companies that provide these services for them.  These additional fees are reimbursed to the bank by Fannie Mae, Freddie Mac and FHA.  Any loss that is incurred by foreclosing on your home is ultimately passed on to the owner of the mortgage, which in most cases is Fannie Mae, Freddie Mac, or FHA.  Who is Fannie Mae, Freddie Mac or FHA?  As you may or may not be aware, they are now owned by the federal government.  The federal government is owned by us, the tax payers of the United States of America.  While you may think you are “screwing” over your bank, in reality you are only increasing their profits.  The people who you are really “screwing” over are yourself, your neighbors and your children who will eventually have to pay higher taxes to pay back the losses that the government is covering.

2.       Myth: “The foreclosure down the street from my home just sold for half of what I owe on my house.  My house must be worth that much as well!”

Fact: Before you begin valuing your home, you need to go out and see at least 10 foreclosures properties for sale.  Many of these homes are in disgusting condition and damaged.  Many are missing kitchen cabinets, have holes in the walls, copper plumbing has been stolen, furnace and air conditioners missing, and they are cockroach infested.  Many of these homes are ineligible for mortgage financing due to their condition.  These homes can only be sold for cash and most likely will be bought by investors who will either fix them and flip them for a profit or rent them out for cash flow.  In addition, even if you can finance the home with a mortgage, many of these homes require $20,000 to $30,000 (or more) in repairs to make them “livable”.  In these tough economic times, how many people realistically have the ability to pay cash for their home?  Also, how many couples who are buying their first home have the ability to save for a down payment plus have an additional $20,000 to $30,000 saved up for the repairs?  Not many.  Therefore, the price of foreclosure properties reflects this fact.  The same people who are now telling you that your home is worth $50,000 are the same ones who told you three years ago it was worth $400,000.  They were wrong then and they are wrong now.  While it is true that until the large inventory of foreclosures are sold and removed from the market that you may be unable to sell your house for a decent price, once they are gone, prices will bounce back rather rapidly.  They will not return to 2007 levels for a very long time (maybe never in some areas) but they will not remain at 2010 prices either.   So what will your home be worth in a couple of years after the backlog of foreclosure properties is sold?  The answer is simple:  look at the rental rates in your area.  Historically (prior to the stupidity of the housing crisis) homes have sold anywhere from 15 times to 20 times the annualized rents for the same home.  If the home down the street that is similar to yours is renting for $1,000 a month, your home will be worth between $180,000 and $240,000 once the foreclosure homes are sold ($1,000 multiplied by 12 multiplied by 15 or 20).  During the peak of the crisis in 2007, many homes were selling at 40 times the annualized rent.  Right now, you can purchase some for 5 times annualized rent.  Both extremes are not realistic.

3.       Myth: “I just want a fresh start with my finances.  Walking away from my underwater home will help me do just that.”

Fact: The reality is that once you lose your home, in many cases your problems are just beginning.  Many people are unaware that if you lose your house to foreclosure, it may trigger rather large and expensive tax bills with the IRS.  If you did a “cash out” refinance on your home, the IRS may treat that amount as income and come after you for back taxes.  Also, any loss the bank incurs will look like income to the government.  All of these events may generate a 1099-C being sent to you and the IRS.  This may further trigger a tax bill for you.  Most ethical modification companies/modification attorneys will tell you that tax implications do exist and that you should consult with a tax expert.  You should STRONGLY heed their advice and sit down with a CPA prior to making any decisions.  The tax laws regarding foreclosures and tax liability are extremely complex and should not be taken lightly.  An expert accountant or CPA can help you determine how your foreclosure may impact you for years to come.  In addition to possible tax consequences, if the bank takes a loss, they can pursue a deficiency judgment against you.  In other words, in many states, any loss they incur with the sale of your home can result in their pursuit of the deficiency for up to 10 years in some states.  The laws regarding deficiency judgments vary from state to state and you should consult an attorney to see if they apply to you.  Remember, just because a bank does not sue you immediately for the loss, in many states they retain the right to do so for up to 10 years.  Five years from now you may find out that the problem you thought was done is starting up all over again. 

Most people are aware that a foreclosure on their credit report will greatly impact their credit score.  What most people do not realize is the other costs associated with this impact.  In addition to not being able to purchase another home for five years of more, your lower credit score will also cost you in higher rates for auto loans, credit cards, and even insurance!  Many insurance companies use credit scores in determining premiums for auto insurance.  Also, most   employers now routinely pulled credit reports on you prior to making a final hiring decision.   If you are competing with another individual for the same position and you have a foreclosure on your credit and they do not, you may lose out.   Think about it…who would you hire if all other factors are equal?  Whatever money you save by renting a cheaper home can easily be offset by the higher costs in credit, insurance, and even your career path!

4.       Myth: “If I sell my house with a short sale, my problems will be done.”

Fact:  A short sale is not a cure all.  While I do recommend this avenue if you have no choice due to unemployment, divorce or other hardships and will lose your home no matter what, short sales can impact you as well.  A short sale is an agreement by your lender to accept a lesser amount than what is owed in order to help you sell your house.  Please remember a short sale does not solve your IRS consequences with regards to deficiency relief that was discussed above.  Please consult a tax professional on this matter. Furthermore, while the bank may agree to release the  lien on your house for the lower payoff amount, they may continue to attempt to collect on the debt that was not entirely paid off and may pursue collection of it for up to 10 years.  Every bank’s policy regarding this is different.  I strongly recommend you consult an attorney to advise you regarding the bank’s rights to pursue a deficiency judgment against you after the short sale.  Also, the process to get an approval for a short sale is similar to that of reapplying for a loan and can be very prolonged and difficult, taking many months to complete. Once the short sale is approved by your lender, the buyer may no longer be interested; there may be changes by the seller’s lender in their approval letter that change the contract substantially so the buyer walks; the house may not appraise by the buyer’s lender for what was offered, the buyer may find there are too many repairs to deal with and many more. If the buyer will not or cannot perform, you may end up with a rejection from your lender. This will result in eventual foreclosure at which time bankruptcy may now become an option and often results in denials and eventual foreclosure.

Please also remember that a short sale may affect your credit very similar to a foreclosure (many banks report them as foreclosures or charge-offs).   As discussed previously, your credit report affects other areas of your life as well.

Friday, September 17, 2010

Willo Historical District History - Phoenix, AZ

Nestled in the very heart of urban Phoenix, Willo was once the epitome of suburbia - a collection of subdivisions on the outskirts of the small, but thriving metropolis of Phoenix. The Willo neighborhood between 7th and Central Avenues can be divided into two sections. J. P. Holcomb used a Homestead Patent in 1878 to acquire and settle the southern portion of Willo between Encanto Blvd. and McDowell. Mr. Holcomb acquired the northern portion, between Thomas Rd. and Encanto Blvd. in 1886 through a Timber Culture Land Patent.

For the next 20 years or so, the land was primarily for agricultural purposes and lay on the outskirts of town. In the early 1900's, four subdivisions were platted, containing home sites with long narrow lots. In the early 1920's, Home Builders, a residential construction firm, built 41 homes in the Bungalow style. During the mid to late 1920's Phoenix, like the rest of the West, experienced tremendous growth and a building boom.

Standards were set for residential construction, and "exhibition houses" (now called model homes) were developed to market the new construction. Most of the building activity in Willo during this period occurred in the N. Kenilworth and Broadmoor subdivisions, and included a "Spanish Rancho Home" exhibition house.

During the 1930's the Period Revival movement brought tremendous variety in architectural styles, including Tudor Revival, Greek Revival, American Colonial Revival, Spanish Colonial Revival and Pueblo Revival. However, the Depression brought construction to a near standstill. The mid to late 1930's and the development of the Federal Housing Administration (FHA) brought construction back to Willo. Construction from this period and later years often featured French Provincial and Monterey styles, with an architectural design that would eventually become what we know today as the Ranch Style house. Construction was also more standardized due to the influence of the FHA and other government-imposed standards. Most of these newer homes are found in the northern section of Willo.
In all, 22 separate subdivisions were platted and developed in Willo by various entrepreneurs from the turn of the century up to the beginning of WWII. Eventually, with the growth of Phoenix over the last century, the individual subdivisions platted by early developers were forgotten and the area blended into one cohesive whole. Unfortunately, the amazing growth of the city resulted in the encroachment of commercial development on what were once quiet suburbs. In the 1980's, residents of Willo successfully lobbied for status as a special conservation district, achieving historic status and assuring that this beautiful part of Phoenix history will be preserved for the enjoyment of future generations.

Development Influences

The historic development of Willo was the result of deliberate actions that shaped and controlled the neighborhood's visual and social characteristics. Many parties, including the local and national real estate trade, prominent civic leaders and the federal government, were responsible for these actions.
Over 700 homes were constructed in Willo, making it one of Phoenix' largest historic neighborhoods. Seventeen subdivisions were platted in Willo, each indicative of the land development and architectural trends of their time. This brochure describes how the resources of public agencies, private firms and organizations were used to create the Willo community. 

Home Builders

In the early 1920’s, most of the Willo area was undeveloped agricultural land on the outskirts of the city. It was difficult to attract families to build their homes in Willo because of its somewhat isolated nature. Home Builders, a speculative residential construction firm, saw great opportunity in this new area.

Through the large-scale construction of homes, the company had the opportunity to create a new community, an atmosphere that encouraged people to purchase a house. Home Builders constructed 41 residences in Willo between 1920 and 1925, each in the same architectural style. The company was also responsible for the marketing of these residences, offering an affordable time payment plan, which appealed to middle class home-buyers. Home Builders thus set the standard for the appearance of the neighborhood, the quality of buildings to be located there and the economic and social characteristics of the area's residents.

Home Builders, like other builders of that time, constructed homes in the Bungalow style. Bungalows have large porches and broad roof overhangs and are usually one story. Wood clapboard, wood shingles, and stucco or brick masonry form exterior walls. The Bungalow style easily accepts simple plan variations and emphasizes the use of common building materials such as brick and wood, making the Bungalow simple and inexpensive to construct.

The Roaring 1920's

During the mid to late 1920’s, Phoenix witnessed phenomenal growth in its population and a great expansion of its city limits. Consequently, there was a growing concern over how the City should accommodate this growth without losing its unique qualities. Civic leaders and members of the local real estate trade agreed that haphazard development would be detrimental both to the current residential population and to property values. The residential building developers of Willo used four strategies to accomplish their goal of forging an economically and socially viable community: deed restrictions and protective covenants; platting large-scale subdivisions; constructing model homes and supporting the local zoning movement. Unlike Home Builders, these early developers only sold residential lots; they did not build speculative homes.

Subdividers controlled land values by placing building restriction clauses on the lots sold. For example, a building cost restriction of $2,500 would prevent those of modest means from building there and would dictate the quality of materials chosen for the structure. Other restrictions regulated specific building materials and types of building use, such as excluding an apartment house from a subdivision. As in many parts of the nation, racial restrictions were imposed as well. These restrictions gave Willo an upper middle class identity. Many store owners; professionals and upper echelon public service employees were the initial homebuyers in Willo.

Developers also set the tone of development in Willo subdivisions with the use of "model homes." The National Association of Real Estate Boards, local real estate firms and the American Construction Council sponsored a national program of model home construction during this period. This program emphasized the American Dream of home ownership as a marketing tool. New building technology was promoted in the model home campaign as well, offering added convenience and low building costs for homebuyers.

The "Spanish Rancho Home," the first building constructed in the Broadmoor Subdivision, was an "exhibition house." The house received wide publicity during its construction and opening. The interior was decorated, and the latest electrical, plumbing and heating systems installed and brought to the attention of the visiting public. After the house had successfully attracted prospective lot buyers to the subdivision and had set the architectural standard for the area, the building was sold to a private buyer.

Most of the building activity in the late 1920's occurred in the large North Kenilworth and Broadmoor subdivisions. Both were platted in 1928. By purchasing lots in large subdivisions, prospective homeowners were assured of neighbors who would meet the same deed requirements as they did, thereby guaranteeing social homogeneity in the area. The large size of the subdivisions offered the opportunity for a creative layout of lots and streets. The curvilinear street pattern of Broadmoor was touted for its design along 11 artistic lines" in keeping with the city beautification and planning movement of the period.

While deed restrictions assured Willo residents that nearby buildings would be of a character similar to their own, there was no means by which residents could control development immediately beyond the boundaries of their subdivision. However, by the 1910’s, large cities adopted zoning ordinances which granted municipalities the authority to regulate development within their city limits. Following suit, Phoenix civic leaders recognized that a zoning ordinance was an essential feature of a modern city.

Therefore, the city hired a prominent San Francisco consultant to draft a zoning code for Phoenix. The first zoning ordinance was passed in 1930. Zoning was supported by the local Realtors for its ability to stabilize property values. William Hartranft, the first chairman of the Phoenix Planning Commission and a longtime resident of Willo galvanized their support. With the exception of a few lots zoned 11 neighborhood commercial" at major street intersections, all the Willo area was designated for single- family residential use. An exception was the provision for modest apartment buildings (such as the El Encanto Apartments) along Central Avenue, which was the historic edge of the Willo neighborhood.

Period Revival Architecture

The "Spanish Rancho Home's" design reflects the influence and popularity of the Spanish Colonial style through the mid and late 1920’s. By the early 1930’s, the Period Revival movement introduced a range of historical styles reflecting picturesque images of early American or European domestic architecture. Period Revival was the dominant style in California at the time, a factor that influenced design trends in Phoenix. The Spanish Colonial Revival style was first exhibited before the American public at the 1915 Pan-American Exposition in San Diego. Characteristics of these low, horizontal one or two story buildings include simple stucco or plaster walls and chimneys, low-pitched red tile gable roofs, arched window and door openings and modest detailing from several earlier eras of Spanish and Mexican architecture.

Tudor/Elizabethan Revival buildings have their origins in medieval England. The style, which was often described as picturesque and romantic, is characterized by its irregular shape; steep roof with sharp gables accented with half-timbering details; large chimney; cast concrete or stone-framed doors and various combinations of sheathing materials such as rough stone, stucco and brick. An interesting variation of the Tudor/ Elizabethan Revival found in Willo is the Cotswold Cottage. The style's most distinguishing feature is its curved wood shingle roof, which suggests the appearance of a historic English thatched roof.

Also found in Willo are examples of the American Colonial Revival style. Although American Colonial is the nation's most popular revival style, it is not extensively represented in Phoenix. Characteristics of the style include Greek Revival door and window surrounds; shuttered, multi-paned windows; low-to-medium pitched gabled roofs, usually with the broadside facing the street and wood clapboard or brick outer walls.

The Impact of the FHA

The worst years of the local economic depression, 1931 through 1935, are illustrated by the virtual standstill of real estate development and construction activity in the Willo neighborhood. The National Housing Act of 1934 rejuvenated residential growth in Willo. The purpose of the Act was to "improve nationwide housing standards, provide employment and stimulate industry, improve conditions with respect to home mortgage financing, and to realize a greater degree of stability in residential construction." The Act created the Federal Housing Administration (FHA) that stimulated new construction by insuring residential mortgages, thus making them easier to obtain. In return, the FHA required that housing built with insured loans meet certain design and construction standards.

The development of Willo during this period was a direct consequence of Phoenix' zoning regulations converging with the policies of the FHA. The City's zoning regulations established types of land uses in Phoenix. The FHA policies mandated a specific palette of building materials and designs, which could be used to qualify for financing programs. The program also encouraged speculative development in large subdivisions by limiting the risk of mortgage foreclosure and by increasing demand for houses based on the FHA's low interest rates. As a result of these influences, like no other time in Phoenix history, there was a uniform, coordinated and controlled vision for developing new residential areas of the city. 

The FHA's directives gave developers a blueprint for the most cost efficient and marketable designs. The FHA sought uniformity in their subdivisions in hopes of creating stable, secure and attractive communities. Building components and styles were mass-produced, thereby cutting costs. Developers were able to plat and subdivide property confidently, for they were assured of financial backing from the banks.

In an effort to boost the public's awareness of their mortgage financing and to show future homeowners the advantages of the program, the FHA, with local lending institutions and building contractors, sponsored the construction of two "demonstration houses" in the Willo neighborhood. The houses, built in the summer and fall of 1936, were constructed for private owners but were opened for public inspection to demonstrate the ultra modern dwellings achieved through FHA financing." The prominent and prolific Phoenix architectural firm of Lescher and Mahoney designed both of these homes. The P.W. Westerlund House, designated the "House of Romance," was the first of three houses to be built Economy of construction and convenience were billed as the main features of the house. The "Home of Happiness" was the second FHA sponsored demonstration home in Willo. The Arizona State Fireman's Association sponsored the "Miracle" demonstration home in Willo. This home, which was endorsed by the FHA, promoted the use of fireproof construction materials such as adobe, cement, steel and asbestos.

Unlike the architecturally diverse subdivisions developed during the 1920’s, the subdivisions developed in Willo during the New Deal years are more uniform in appearance. This uniformity was a response of local developers to federal housing initiatives.

FHA era houses were constructed in two basic styles: French Provincial and Monterey. The FHA borrowed the general shape of their homes from the Period Revival styles but stripped the houses of elaborate exterior details, ornamentation and finishes. Built when the private automobile had become the dominant mode of transportation, these buildings incorporate garages or carports into their design.

The most distinctive feature of the Phoenix-FHA interpretation of the French Provincial style is its steeply pitched, hipped roof. These one-story buildings are asymmetrical in plan and have interlocking wings, giving the appearance of a rambling farmhouse. The Phoenix version of the FHA Monterey style is a forerunner of the modern Ranch style house. These are one-story structures with a low, horizontal orientation and an asymmetrical front facade. Exterior walls are covered by stucco or plaster. They have low-pitched gabled roofs usually sheathed in Spanish tile, and have adjoining garages.

Preserving Neighborhood Character

The effort to maintain the Willo neighborhood's character still continues. In 1986, Willo residents and city officials prepared the Willo Neighborhood Conservation plan, addressing such quality-of life issues as the development of high-rise office buildings in the area. In 1990, a neighborhood coalition successfully promoted designation of Willo as a local historic district. With the continuing commitment of its residents, the Willo neighborhood will remain proud of its past and preserving the neighborhood's unique qualities for the future.

Monday, September 06, 2010

Historical Phoenix, AZ Homes Information and Links to Free MLS Searches: Mortgage Rates Beat Tax-Credit Benefits

Historical Phoenix, AZ Homes Information and Links to Free MLS Searches: Mortgage Rates Beat Tax-Credit Benefits

Mortgage Rates Beat Tax-Credit Benefits

Mortgage rates beat tax-credit benefits
By Aldo Syaldi ~ August 25, 2010

Homebuyers today can potentially save several times more money in interest costs than buyers who took out a mortgage in early April and claimed an $8,000 homebuyer tax credit.

Yet buyers, who rushed to meet the April 30 deadline for the federal tax credits, appear much less eager to borrow at the lowest interest rates in 60 years.

Mortgage applications for home purchases are 42 percent below the pace seen in April, according to the Mortgage Bankers Association. Home resales dropped 27.2 percent in July from June, according to a report Tuesday from the National Association of Realtors.

Someone taking out a $240,000 mortgage today at a 4.42 percent interest rate could save $33,287 in interest costs over the life of a 30-year loan. That's four times the $8,000 credit used by a first-time homebuyer who financed at 5.21 percent in early April.

So why aren't more people buying now?

Timing offers one explanation. Buyers earlier this year, not knowing rates would drop, took the best deal available to them at the time.

That soaked up future demand, which more optimistic forecasts hold should return as lower rates persuade buyers to get off the fence.

Because few people stay in a home or keep a mortgage for 30 years, the time needed for monthly mortgage savings to match the $8,000 credit is another consideration, said Cameron Findlay, chief economist of

On a $240,000 mortgage, a buyer would need to stay put for almost six years for monthly mortgage-payment savings to match the upfront credit.

Studies in behavioral finance support the idea that people will go for a payout upfront versus a payout spread over a long period that is worth more.

Uncertainty leads to stagnation Given the choice between a 10-percent pay raise when inflation is 12 percent or a 4-percent raise when inflation is 2-percent, respondents almost always go for the bigger raise, even though it means they will lose ground, said Greg Salsbury, an executive vice president with Jackson National Life Distributors in Denver.

Rather than seizing opportunities, many people also tend to freeze up when there is too much uncertainty.

"Unemployment, the deficit and the overall economy are impacting people's decisions disproportionately," Salsbury said. "There are a lot of things in play."

Some mortgage brokers and bankers argue against complicated explanations about why buyers are missing in action.

"The majority of my borrowers used the $8,000 tax credit toward the down payment, and the Seller paid closing costs," said Marilyn McConnell, a mortgage adviser with Cherry Creek Mortgage.

Lower interest rates don't help those buyers who can't come up with the needed down payment or who are trapped in a home they can't sell without taking a loss.

Deflationary expectations Selling at a loss is psychologically hard, even if you realize the lower payment on the next property will make up for it over time, said Denver resident Shanti Klemm.

"We'd love to buy a new home, but we have to sell first. It's a Catch-22," said Klemm, who estimates her family will lose $25,000 by selling its condo.

Another more worrisome explanation is that consumers expect further declines in interest rates or home prices. A survey from real-estate website found that a third of homeowners thought home values in their area had more room to fall. If prices are headed lower, the rational thing to do is to wait for the better bargain. But deflationary expectations, like inflationary ones, become self-reinforcing. During the housing boom, people bought homes because they worried that prices would rise the longer they waited. Flip that around, and people may now be waiting to buy because they expect prices to go lower.

Realtors see how many incredible deals are out there, and, with interest rates being so low say it's a ripe time to buy.