Phoenix Real Estate Market Update - June, 2013

June, 2013

After what seems like an eternity of the most depressed buyer's market the Valley has ever weathered, Sellers are NOW seeing the pendulum swing in their direction! Values are continuing to surge upwards and Sellers are frequently receiving multiple offers - within days of offering their home for sale. With the real estate market so clearly favoring the seller, it would be natural to assume that Sellers are now “bullet proof”. Unfortunately this market, like all past strong seller markets, is with potentially costly seller mistakes.

• “Zestimates” / automated valuation systems: Although Zillow has done a fabulous job of marketing their automated online valuation system, what they haven't done as fabulous a job of accuracy with that valuation. Too often would-be Sellers visit their site (or the multitude of similar sites) to determine "their home's value". Sadly, these systems are NO substitute for an appraisal or (even better) the massive exposure of the home on the open market. Ultimately, a home is worth what a Buyer will pay. In a market that is generating competition for homes, prices can escalate beyond what any website or appraisal claims the home is worth. Valuation systems use preset computer generated metrics to estimate the value. It is difficult to foresee a time when these systems will be accurate, as determining home values is something of an art. Values are comprised of market conditions, property's location, features, pricing, accessibility, market exposure (i.e. marketing), and negotiation. There is simply no substitute for someone with real estate expertise actually viewing the property.

• Appraisals: Appraisals are an "opinion of value for lending purposes". That is what it is, an OPINION of value. This is so true that homes that obtain more than one appraisal often receive entirely different numbers. I’ve seen it over and over. It isn't that appraisers aren't attempting to do good work; it is that they are always looking into the past for value. Appraisers are required to use sales in the last 3-4 months (due to our fluctuating market, which has changed from when it used to be the last 6-12 months). The highest likelihood of an appraisal being accurate, is where the homes are homogenous and supply and demand is in equal balance (a four to six month of supply of homes) for an extensive period of time. We don’t have that history. Balanced markets in the valley have not been common. In a declining market (as we saw in 2007-2011) appraisals often came in higher than true market value. This is due to the very definition of a declining market is one where a home today is selling for less than yesterday. Conversely, a rising market (as we are in now) has tomorrow selling higher than today. This is the current problem for Sellers - appraisals are often coming in lower than buyers have offered to pay. Without addressing these appraisal issues upfront, Sellers can find their value being slashed. Fortunately, I have distinct success and experience in challenging a weak appraisal.

• Choosing your agent: All too often, Sellers use the first agent they talk to (so the primary hiring criteria is someone simply being there). Additionally, Sellers may pick an inexperienced agent. This does not mean the agent hasn't "been in real estate for years", they may however lack experience. Another error can be using our friends and family as Realtors. It can be very difficult for Sellers and their family to have the conversations that are necessary to really sell a home. Honest feedback on pricing, home staging, and commissions can result in destroyed relationships. Again, finding the agent with both knowledge and marketing power can produce results that outperform an average agent (or friends/family) by thousands of dollars, not to mention save well established relationships.

• "Saving the commission": Quite honestly, Sellers can sometimes be "pound wise and penny foolish", often worrying about saving the commission expense while losing the benefits that commission is really paying for. If it doesn't matter who sells your home then Sellers would always be better served just selling it themselves or paying the part-time agent a small amount to write up the deal. This is not the case however. If an agent cannot produce results above what a Seller can do, you simply have the wrong agent. A quality agent can not only counsel Sellers on how to prepare the home for market (avoiding the first costly mistake, a badly presented home), but expose the home to the maximum amount of buyers. This is in addition to the often undervalued marketing and advertising an agent pays for to market YOUR home. Competition for a home is THE most important factor in generating the MOST money for the home.

As always, I stand ready to guide both Sellers and Buyers in this (or any) market. If you are considering a home sale or purchase, you owe it to yourself to know what I will do for you. A simple call or email and I can provide you with a strategic plan to assist you. And the best part, there is no cost to you. I look forward to earning your business and the opportunity to work with you. Call (480-239-3023) or email (john.groves@azmoves.com) anytime. I’m here to help.

Enjoy your summer-

John