Arizona home buyers face complicated hunt

Those fortunate enough to be eligible buyers during the first eight months of 2010 often faced a long, frustrating house hunt that left them feeling less like the hunters and more like the prey.

The home-buying process has gotten so complicated that even the most experienced real-estate agents have been forced to seek additional training and expert advice, said Holly Eslinger, president of the Arizona Association of Realtors, and other industry analysts.

Eslinger, broker and owner of Scottsdale-based Exclusive Homes and Land, said the extensive documentation prospective buyers must provide to qualify for a home loan dwarfs anything boom-era lenders had required.

On top of having to meet strict financial requirements, house hunters in 2010 must be willing to make sacrifices in the process.

• New homes generally cost the most and take a few months to build, but they offer total customization, a helpful seller and little to no buyer competition.

• Investor-owned homes generally come with cosmetic repairs already completed, and investors frequently offer the most flexible financing options. But buyers still need to be wary of possible wear or damage underneath the fresh paint and carpeting. And in some cases, buying from an investor can trigger more stringent creditworthiness requirements.

• Short sales promise bargain prices, and in many cases the homes are in excellent condition. However, they involve lots of extra paperwork and a negotiation process that can take months with no guarantees that the sale will go through.

• Bank-owned homes generally cost the least - a savvy buyer can wind up paying a small fraction of the home's previous market price. Still, they come "as is," which frequently means they are completely trashed, the seller is often slow-moving and unresponsive, and intense competition from cash-paying investors can push traditional buyers repeatedly to the back of the line.

Four recent homebuyers, each of whom made a choice different from the others, demonstrate how the buyer's financial and life circumstances often dictate the home they buy.

New home

As a working single mother of three about to send her youngest off to college, recent new-home buyer Kim Parsons said she was more than happy to pay a little more for a new home that was easy to buy and came with a warranty.

"I am looking at (paying for) college and tuition next year and I didn't want any unexpected costs," said Parsons, who said she was finally in a position to buy after renting her whole adult life.

Parsons chose to buy a four-bedroom home in west Phoenix from Los Angeles-based KB Home after a fruitless, six-month effort to buy a bank-owned home, an experience Parsons described as dehumanizing.

"It was pretty much the worst experience of my life," she said.

Parsons said the process of buying a new home was not entirely stress-free - there was a moment of uncertainty when the home's appraisal came in lower than the agreed-upon price.

However, Parsons said they reached a compromise - a small price to pay for feeling human again.

"It was what I expected the first time," she said.

Short sale

Once their hearts were set on living in upscale, family-oriented Ahwatukee Foothills, a suburban area of Phoenix, the McGrews' options immediately became limited.

Mike McGrew, who recently completed a stint in the U.S. Army and now works for a defense contractor, said there were few new homes for sale in the community, and many existing homes on the market were listed by unmotivated sellers who had not yet accepted that their homes were no longer worth 2007 prices.

All signs seemed to be pointing Mike and Shea McGrew toward a short sale.

They recently moved into a beautiful home - vacated weeks earlier by its formerly upside-down owner - in a quiet, family-friendly neighborhood.

But finding the short-sale home and closing the deal took the McGrews a full year.

While they are happy with the new home, both acknowledged the presence of a few nagging frustrations.

For one, they will have to pay for repairs on their new home, which is usually the seller's job.

The McGrews know firsthand, because they just paid for repairs on the home they sold in Kansas, where Mike was stationed.

Perhaps even more frustrating was watching the backyard die and the pool go green while they were waiting for the short-sale paperwork to go through.

"I snuck in a couple of times to water the plants," Mike said.

Fix and flip

Amanda Sanders is another casualty of the battle for a bank-owned home, which she said cash-paying investors clearly won a long time ago.

After nearly a year in which one offer after another was rejected in favor of an investor's cash bid, Sanders and her fiance, Blake Barganski, decided a conditional surrender was the way to go.

The couple decided they would try one last offer, this time on a home near Queen Creek that had been purchased and renovated by a large real-estate investment firm.

"It was either we get the next house, or we live in an apartment for the rest of our lives," Sanders said.

Thankfully, the former enemy turned out to be benevolent, once Sanders and Barganski had accepted their fate as retail buyers on the foreclosure food chain.

The seller, Aliya Investments, is a large real estate-investment firm based in Florida that sold more than $12 million worth of Phoenix-area homes during the past year, according to Linda Vejnoska, company spokeswoman.

Sanders said buying from an investment firm was actually a good experience, especially compared with competing against one.

"When my Realtor called his Realtor, they actually called back the same day," she said.

The couple said they liked the Pinal County home, which looked like new and didn't require any fixing up.

The only snag, a minor one, was that Sanders had to clean up a few outstanding credit issues because even though she had been approved for a Federal Housing Administration-backed mortgage, the lender's credit-score requirements jumped 40 points when it learned she would be buying from a fix-and-flip investor.

Fix and flip, Part 2

Ken Burck Enterprises is another real-estate investment company currently buying and flipping bank-owned homes.

OK, one home.

But Scottsdale-based investor Ken Burck, a chiropractor, and his wife, Roseanne, who does the books, also have nearly a dozen rental properties and say they have learned enough about how the game works to earn a tidy profit.

The Burcks have enough money socked into their side business that they can buy modestly priced homes with cash, fix them up and then sell or rent them, depending on the demand.

Still, Burck recognizes there are pitfalls even seasoned veterans could fall into.

For instance, Burck learned by attending a seminar that the smart investor looks for homes that need cosmetic work but nothing structural, which would be very expensive to fix.

Even with enough cash flow to keep buying and fixing homes, Burck is limited by his busy schedule and the fact that he does most of the renovation and landscaping work himself.

But staying small is also his strength. Burck recently bought a bank-owned home in north Phoenix for $56,000 - a no-hassle transaction in which he paid cash.

After putting an estimated $15,000 into renovation and landscaping, Burck said he planned to list the home for $94,000, sell it, and then start again.

Burck says, at the rate he's going, he isn't too worried about reports of a bank moratorium on foreclosed-home sales.

"There are so many vacant homes out there already," he said.

by J. Craig Anderson The Arizona Republic Oct. 17, 2010 12:00 AM




Arizona home buyers face complicated hunt