For example. 

There is a mythical $100/square foot price barrier I’ve seen in more than a handful of home buyers in Tucson.  I have no idea where this one comes from.  Often, home values are much more than $100 per square foot.

Take the chart above.  That’s the average sale price per square foot for homes in Southeast Tucson, built after 1990, with at least 3 bedrooms and 2 baths – a very typical home for that area.  Can you get a home there for less than $100/square foot? 

Absolutely.  The data shows you can.  In fact, it looks like about half the homes sell at or below $100 a square foot.

Is it likely to be in fabulous condition? No.  It will be average condition.

Will it be on a huge lot?  Not likely.  The typical home in that region isn’t. 

Unless it is a short sale or otherwise a distressed property.  If you want an above average house in the area, for a below average price, then there’s going to be something wrong.  Otherwise, it’d sell for more.

If you want the above average house, you’re going to pay above average – and that’s appropriate.  There’s nothing magical about the $100 a square foot mark.  That’s just where some homes happen to sell at in this small sample of homes in Southeast Tucson.  But certainly not the best ones.

Especially those condo and townhouse homeowner associations.

It’s fairly common to find pet restrictions in HOA governing documents.  If you’ve got a large dog – say 50 pounds or more, you need to make especially sure you’re reading through those association documents carefully.  Often, the HOA will limit you to a certain number of pets, or to pets only under a certain size.

Typically, when you buy a condo or townhome here in Tucson, you get a copy of the association documents.  What normally happens is that the HOA moves very slowly, and you don’t get those documents until you’re nearly through with the home purchase.  So you could be well through your inspections, ready to close, and find out your 75 pound Fido isn’t allowed to live in your soon-to-be-new condo.

To add to the fun, those governing documents aren’t especially easy to get when you’re in the pre-contract stage.  Some of the larger HOA management companies in Tucson will provide you a copy – for a fee of around $250.  Sometimes, you can hunt down the person who does the association management and ask them directly.  Sometimes, the listing agent knows, or can get a copy of those documents from the Seller – assuming the seller kept their copy.  Often, they don’t have one anymore, and there’s no guarantee the rules haven’t changed in the meantime.

So just tread carefully, you Tucson condo buyers with large dogs.  And do your due dilligence carefully.

photo courtesy of the Digital Muzzle

Of course, you don’t need the map, though it can be useful.  If you go to the Tucson home search on my site, you can enter whatever criteria you’d like and check the “Bank/Lender owned” box in the Foreclosures section.

View Bank Owned Homes for Sale in Tucson in a larger map

It has not.

To qualify for that $8k credit, you had to be under contract to purchase a home by April 30, 2010.  And then the deal had to close by June 30, 2010.  These things have not changed.

What *did* happen is that the senate voted through a bill that would extend that closing date to to September 2010.  It has not passed the House.  It has not been signed by the President.  It is not yet a law.  It is only step one towards becoming a law.

A review of the process, inspired by today’s post over at the Mortgage Report.

There’s a couple of things to watch out for when you buy homes like that.

This one is in unsubdivided Pima County – it isn’t in Marana or Tucson or Oro Valley.  This is important.  When someone sells 5 or fewer unsubdivided parcels in an unincorporated area, the Seller has to provide an Affidavit of Disclosure, which talks about legal and physical access, road maintenance, floodplain, water supply, and various other important issues.

Which ought to set off some alarms in your head.  If it is a dirt road – who maintains it?  Is there a recorded road maintenance agreement?  Is there a voluntary HOA that takes care of it with an annual contribution?

And then there’s things like septic systems and water supply.  Is the septic system sized properly?  Is it in good shape?  Where does the water come from?  Is there a private well or a shared well or some other water company?  Having water at the house would be a good thing.

How about easements and encroachments?  A title report should turn up the recorded easements.  But many times on older homes on larger parcels, previous owners have thrown up a shed or fence or other item that they assume is on or near the lot line.  Or there could be a walking path or bike path over the middle of the property that people have used for years and intend to keep using while you own it.

Buying rural property takes a little more consideration and investigation than buying a home in the middle of an established subdivision – but for some, the rural lifestyle is all worth it.

Someone the other day told me he wanted to play the backup offer game on a property that was already under contract with another buyer. 

“You know.  Make the seller an offer and let them kick the existing buyer out.”

Yeah.  That’s not exactly how it works.  Let’s review.

Most of the time, when a property is under contract, the status changes to Active Contingent.  In an Active Contingent status, the seller can not kick out that buyer.  The buyer can walk away from the deal due to inspections or because a different contingency wasn’t met, but there’s no method for a seller to unilaterally kick that buyer out of the deal.

As a home buyer, at least in Tucson, you can make a backup offer on that property, and the seller may chose to accept your offer as backup, or they may not, at their discretion.  If your offer is accepted as a backup, you have to wait and see if the first buyer walks away from the deal.  The seller may be less flexible in their repair negotiations with the buyer if they’ve got your offer waiting in the wings, but the seller can’t get rid of that buyer directly.

Even if your offer is for more money or has better terms than the existing buyer – in an Active Contingent status, the seller can’t just decide to take yours and ditch the existing buyer.

Active CAPA properties are a whole other deal.  With a CAPA property, the existing buyer usually has to sell their home first, so there’s a home sale contingency on the deal.  (Either that, or it is a bank owned property or short sale where the bank will look at multiple offers.)  In this instance, the seller can accept your offer and then go back to the first buyer and make a demand – they tell the first buyer to either remove the home sale contingency or walk away.

If that first buyer walks, then your offer becomes primary and you’re now under contract to purchase it.

Quite honestly, it’s a “game” that rarely works.  Either the first buyer doesn’t walk away from the home or you get tired of waiting and find another home.  It’s possible, but infrequent.

Which astounds me.

A home loan is usually the biggest debt a person carries.  That sucker can last 30 years.  There are severe consequences if you don’t meet your obligations or if you agree to a home loan that you really can’t afford.  When you commit to such a large obligation, you really need to understand what you’re signing up for.

Sit down in front of your loan officer and ask a billion questions.  Ask as many questions as you need to ask in order to understand your loan options, and the pros and cons of each choice you make regarding your financing.  And if your loan officer won’t do that, find another one.  When it comes to financing your home purchase, the responsibility is yours to understand what you’re getting yourself into.

And I know – car shopping is a whole lot more fun than home loan shopping, and typically less confusing.  But the obligation of a home loan is too great to enter into one lightly.  Make yourself comfortable with the money part of the home buying experience, and the rest will go so much easier.

(psst – I know excellent lenders.  If you need a recommendation, email me.)

So let’s dispel some fears and misconceptions.

First, having your credit pulled to see what kind of loan you qualify for doesn’t really hurt your credit score – estimates are that you’ll get dinged about 5 points.  But you’ve got to do it to get the loan.  Good news is that you can have as many lenders you want to talk to pull your credit score in 14 days, and it only counts as one time.  So whether you talk to one lender or ten, it all only counts once.

Second, you need a preapproval from a lender in order to make an offer on a house.  In 7 years practicing real estate in Tucson, I’ve never seen a seller accept an offer where a Buyer didn’t provide a lender signed loan approval. 

It doesn’t make sense to go out and shop for homes when you can’t buy the one you want when you find it!  Not having that pre-approval in hand puts you in a position where you can’t act on the right house when you find it.

And finally, until you’ve talked to a lender, you have no idea what kind of payment you’ll have.  Yes, you can go online and fill out loan payment calculators, but your interest rate is heavily influenced by how much you have to put down and what kind of credit score you have.  And only a lender can tell you what rates apply to you and your specific situation.

Getting a pre-approval is a relatively painless process for most people.  And it puts you in a position where you have the most power and knowledge and control over your home purchase.  If you need a good lender recommendation, contact me and I’ll share!

The short sale language I use with my home buyers gives them the opportunity to walk away from the purchase unilaterally at any time before the seller and bank come to an agreement.  That protects the buyer from being locked in forever to a single property.

As a side effect, since buyers are just sitting and waiting forever, they often find other properties that they like at least as much or better.  So can you make offers on a second property while still keeping that first deal, just in case?  What if the second property is a short sale too?

There’s a couple of problems with that – and a couple of solutions.

First, as a home buyer, you need to be acting in good faith.  Every home you make an offer on, you need to intend to purchase.  And you need the financial capability to purchase it.  So if you make offers on two homes, you’d better be able to purchase them both, unless you write that second offer very carefully.  If both sellers were to tell you at the same time that they’ve reached agreement with the bank, then you are now obligated to purchase two homes.  And that’s probably not what you intended.

There’s also a potential disclosure issue.  The typical purchase contract that I use says that you the buyer have told the seller anything that would prohibit you from completing the purchase.  Being under contract for another home when you can only afford to purchase one would certainly prohibit you from buying that second house.

In theory, yes, you can make an offer on that second house while being under contract with the first house.  But you have to disclose what’s going on, and your agent better write a very good contingency into your offer so that you’re never obligated to purchase more than one house at a time.

It’s possible.  I just can’t recommend it.

So let’s review how each works.

Usually, negotiations start when a buyer writes an offer.  The Seller has 3 options – accept it, reject it, or counter it.  If they write a counter offer, it goes back to the buyer.  And the buyer has the same 3 options – accept it, reject it, or counter it.  And that goes back and forth until someone either accepts the counter offer, or until someone rejects it.

With regular counter offers, there’s only one buyer and one seller negotiating for the house.

Multiple counter offers are different.  By definition, multiple counter offers involve multiple potential buyers at the same time.

Let’s say you like a house and submit an offer.  Two hours later, the listing agent calls and says they’ve received a second offer on the house from another buyer.  So the seller now has 2 offers in front of them.  And THAT gives the Seller a lot of options.

The seller can accept one and reject the other.  The seller can counter only one of the offers – which brings up some interesting dynamics regarding timelines for the buyer that didn’t receive a counter offer.  If the seller response time is long enough, potentially the seller can counter one buyer, try to get them higher, while keeping the second offer in reserve.

But sometimes the Seller wants to give counter offers to both buyers.  And they make a multiple counter offer to each buyer. 

The multiple counter offer is unique in that the seller produces this counter offer AND they have the final word on which they’ll accept.  A multiple counter offer goes out to more than one buyer, each buyer gets to consider the terms and accept or change them again.  All the buyer responses all go back to the seller and the seller gets to pick which one he wants to take.

The multiple counter offer made to each buyer doesn’t have to be the same.  The seller could propose different terms and price to each buyer.  And each buyer can accept, counter, or reject that multiple counter offer.

Things get more complex, and fast, when there’s more than one offer involved.  Be sure you know your timelines and clearly discuss your negotiating strategy with your agent!