'09 sales pace driven largely by foreclosures

Lenders in 2009 foreclosed on about 41,000 single-family detached homes in Maricopa County, according to a report from Arizona State University. That's more foreclosures than the Valley has seen during any previous year on record, accounting for more than 35 percent of all existing-home transactions, the report said.

Its author, Jay Butler, associate professor of real estate at the W.P. Carey School of Business, said overall home-resale volume in 2009 rivaled that of the real-estate boom's peak year of 2005, but for all the wrong reasons.

"That (2005 sales volume) was ... due to rising home values and a type of euphoria about real-estate investment," Butler said. "Now we're seeing a totally different type of activity driven by foreclosures."

Foreclosures were up in December, at 4,060, compared with the previous month's total of 2,985, and the median single-family home

price decreased to $140,000 from $143,000 in November, according to the ASU report.

 

Home resales increased, with 5,740 sales in December compared with 5,350 sales the previous month.

Compared with December 2008, foreclosures increased about 31 percent, the median resale price was down 4 percent, and resale volume was up 33 percent.

Some local analysts include parts of Pinal County in their data, but ASU's data include strictly Maricopa County. Both data sets showed similar trends.

 

by J. Craig Anderson - Jan. 15, 2010 02:01 PM
The Arizona Republic

Tax credit of up to $8,000 is extended for qualified first-time home buyers purchasing a principal residence.

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation. Who is eligible to claim the $8,000 tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and on or before April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail.

However, the law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.

Persons who are claimed as dependents by other taxpayers or who are under age 18 are not qualified for the tax credit program.

1. What is the definition of a first-time home buyer?
   The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
   
   For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
   
   
2. How is the amount of the tax credit determined?
   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
   
   
3. Are there any income limits for claiming the tax credit?
   Yes. For sales occuring after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
   
   
4. The income limits for claiming the tax credit were raised when the tax credit was extended. Are the higher limits retroactive?
   No. The new income limits are only applicable to purchases occurring after November 6, 2009.
   
   The income limits for sales occuring on or after January 1, 2009 and on or before November 6, 2009 are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
   
   
5. What is “modified adjusted gross income”?
   Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
   
   To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
   
   
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
   Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
   
   
7. Can you give me an example of how the partial tax credit is determined?
   Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
   
   Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
   
   Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
   
   
8. How is this home buyer tax credit different from the tax credit that Congress enacted in early 2009?
   The tax credit’s income limits were increased, the documentation requirements were tightened, and the program's deadlines were extended.
   
   

GREAT NEWS! FHA Relaxes Property Flip Regulation For One Year

The FHA relaxed the property flip regulations. 

This waiver is effective for all sales contracts dated on or after February 1, 2010 and will end on January 31, 2011.  Certain property may be resold and financed using FHA insured financing without waiting 90 days.  FHA has temporarily waived the 90 day wait period, on certain transactions.  This means that these recently purchased homes may be sold and financed with FHA insurance!

·         Private sellers and investors are now eligible to take advantage of this waiver.

·         These transactions must be arms-length, with no identity of interest between the buyer and the seller or other parties participating in the sales transaction.

·         In cases where the sales price is 20% or greater than the seller’s acquisition, the lender must justify the increase in value with supporting documentation of renovation, repair and rehabilitation work.

o   If no such work was performed, the appraiser must provide an appropriate explanation of the increase in property value since the prior title transfer.

o   The lender must order a property inspection and provide that report to the home buyer. Buyer’s may be charged for the cost of this inspection.

Great news! FHA has increased Phoenix Area lending limits to $346250 from $271050

Multiple offers making a comeback (Mainly Phoenix Metro Area Foreclosure Properties!) But highest bidder isn't always the winner

In the current home sale market, it might seem ludicrous to make an offer on a listing if it means competing with another buyer. However, multiple offers are on the rise in some markets( especially the Phoenix Metro Foreclosure Market). But, it doesn't always mean that you need to pay a lot more than the asking price.

(If you would like a list of Phoenix Area Lender Owned & Foreclosure Homes --Click Here:  Please fill out my form.)

Sellers are ever hopeful of receiving multiple offers. These days, this is usually an unrealistic expectation. That is, unless the listing is a prime property in a high-demand neighborhood where few homes are being offered for sale.

Price is a critical part of the equation. Some sellers price their homes low because they need a quick sale. If the price is below market, multiple buyers could step forward with offers. Sometimes an overpriced listing is reduced to market price or below and results in offers from more than one buyer.

Most multiple offers today are on low-end foreclosure properties. Investors make up a large part of the buyers in this segment of the market. In some areas of California and Florida, prices have fallen 40 percent since the market peaked in 2006.

HOUSE HUNTING TIP: Don't shy away from making an offer just because there is more than one offer. In some cases, a dozen or more buyers make offers on foreclosure properties that are listed at bargain prices. But, the highest bidder is not always the winner.

Even in non-distressed-sale situations, multiple offers in today's market don't always result in an overinflated sale price. For instance, a charming older home on a sought-after street in the Crocker Highlands neighborhood of Oakland, Calif., sold after only two weeks on the market with multiple offers. The property was listed for $1.3 million, and sold for $5,000 above that price.

In another case, buyers from the East Coast bought a home in Marin County in the San Francisco Bay Area. Against their agent's advice, they offered less than the asking price even though they were competing against other buyers for the property. Their offer was the lowest of three offers, but it was accepted by the sellers. The reason the sellers accepted the lower offer was that the winning buyers had solid financial backing.

There are far fewer financially qualified buyers in the home-buying market today than there were two years ago due to credit tightening, more rigorous financial qualification requirements and recent stock market losses. In some areas, as many as one-third of home sale transactions fail to close, often due to the inability of buyers to obtain the financing they need.

Sellers who receive more than one offer should carefully consider all aspects of the offers, not merely the offer price. An offer from an all-cash buyer who doesn't need a mortgage to finance the purchase, and who can close quickly, should be taken seriously even if the price is lower than the other offer(s). However, some all-cash buyers -- who are fully aware of their strong position in this market -- feel they are entitled to a major price discount.

Whether or not you'll have success countering for a higher price will depend a lot on the profile of the buyer. Buyers who intend to occupy the property for the long term are more likely to pay more than will investors who base their purchase decisions on the numbers, not their emotions.

THE CLOSING: Sellers should try to keep greed out of their decision when faced with multiple offers. Today's buyers are willing to walk away from a negotiation rather than pay over market value, or it they think the sellers are unreasonable.

Copyright 2008 Dian Hymer

Investors Return to the Phoenix Market- Thanks to Foreclosures

Many foreclosed homes are bought by investors who can pay cash, market watchers say. That means fewer homes are going to buyers who plan to live there and hang onto the house for a while. Owner-occupied homes ultimately help an area's recovery.

The Valley's housing market is seeing the flipside of the investor cycle now. In 2004, investors cashing in on loose lending guidelines, the Valley's growth and relatively affordable housing started the buying frenzy that led to the wild run-up in home prices. Many of those investors, who didn't sell before prices dropped, ended up walking away from the homes and starting the Valley's foreclosure problem.

Aimee Jackson has been trying to buy a foreclosure home in the West Valley for the past six months, but the pharmaceutical sales representative keeps getting beat out by investors.

"I am pre-approved for a loan, and that's not easy now," said Jackson, who has been making offers on newer homes in Surprise, Peoria and Buckeye. "But lenders all seem to be going for the cash offers from investors. It seems unfair."

Jackson is going to keep looking at foreclosure resales because she doesn't think prices are going to go up on those properties anytime soon. She also doesn't think regular homeowners are pricing their houses low enough to compete with foreclosure properties.

Bettina Franco, a real-estate agent with Phoenix's HomeSmart, said lenders are trying to resell so many foreclosures now that homeowners trying to sell have given up trying to compete with them.

There is concern among real-estate analysts that investors will again hurt the housing market.

"In some areas of the Valley, we are starting to see the bottom for prices," she said. "But we need to get rid of all the foreclosures first and watch what investors are doing."

by Catherine Reagor - Oct. 26, 2008 12:00 AM
The Arizona Republic

30000 Phoenix area Homes Foreclosed On, To Date, In 2008

As long as foreclosures continue to climb, home prices will fall.

More than 30,000 Valley homes have been foreclosed on so far this year. That compares to fewer than 1,500 foreclosures in 2006. Now, almost all of the homes are going back to the lenders, which are reselling them for bargain prices.

"It's clear foreclosures are putting a lot of pressure on home prices," said Tom Ruff, a real-estate analyst with the Information Market, which compiled housing-value data for The Republic.

The impact on prices is apparent. The Valley's overall median resale price without factoring in foreclosures is $215,000. The overall median resale price of a foreclosed home is $149,000. That foreclosure median pulls down the overall median resale price to $180,000. At the height of the housing boom in 2006, the median was $267,000.

Ruff said foreclosures could peak by the end of the year.

But that doesn't mean prices will have hit bottom because of the backlog of foreclosures that lenders still need to liquidate.

Foreclosure properties are dominating the Valley's housing market. In a few Valley neighborhoods, there are more foreclosure resales than regular resales.

Lower home prices are drawing more buyers, but they may not all be the types of buyers neighbors want.

 by Catherine Reagor - Oct. 26, 2008 12:00 AM
The Arizona Republic

Phoenix leads nation in home price drop- Prices fell 30.7%

$7500 TAX CREDIT For First Time Home Buyers!!!

For aspiring home owners who find their goal stubbornly elusive, newly enacted legislation providing a tax credit of as much as $7,500 for first-time home buyers might just be the opportunity of a lifetime.

But like so many of the good things in life, time is of the essence for buyers who want to take advantage of this outstanding opportunity. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible. Use the links below to learn more about the tax credit.

First-Time Home Buyer Tax Credit at a Glance

• The tax credit is available for first-time home buyers only.
• The maximum credit amount is $7,500.
• The credit is available for homes purchased on or after April 9, 2008 and before
  July 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• The tax credit works like an interest-free loan and must be repaid over a 15-year period.

For More information:  http://www.federalhousingtaxcredit.com/index.html or call Dennis Balthazor @ 623-776-6966

Congress May End Down Payment Assistance!!!

The housing bill that’s expected to pass in the Senate this week seeks to end the seller-funded down-payment assistance programs that allow home buyers to put no money down on a home loan backed by the Federal Housing Administration. But experts predict a long battle may lie ahead for opponents of the assistance programs, which I wrote about in today’s WSJ.

“The down-payment assistance program has had nine lives,” says Howard Glaser, a former Department of Housing and Urban Development official who argues that the program represents a significant liability for the government.

Indeed, since 1999, the nonprofit groups that provide assistance have mounted a strong political effort to keep the programs intact, something that they succeeded in doing when the House preserved the programs in its housing bill that passed last month.

“These groups are amazingly adroit. They know how to play the game in Washington,” says Brian Chappelle, a mortgage consultant at Potomac Partners who worked at the FHA in the 1980s.

The programs have backing from minority and low-income homeownership groups and several vocal legislators, including Republican Rep. Gary Miller and Democratic Rep. Maxine Waters, both from Southern California.

For its part, the nonprofit organizations say that the FHA has a double-standard. Four years ago, it created its own no-money-down program through the American Dream Downpayment Act, and it relied heavily on groups like Nehemiah Corp. of America for business. “We are the activity that kept FHA alive,” says Scott Syphax, Nehemiah’s president and chief executive.

But the FHA, which has submitted for public comment a regulation that would end the programs, believes that this may be its best chance to end the programs because no-money-down loans have taken much of the blame for the current foreclosure mess and because the housing bill set to pass Congress will ramp up activity for the New Deal-era agency.

One sign that the tide may favor the FHA this time: earlier this year, the House had considered eliminating the down payment needed on an FHA loan, while the Senate had pushed for a 1.5% down payment, instead of the current 3%. The realities of the housing market have forced a change in course. The House is fighting to keep the 3% down payment level, while the Senate would increase the limit to 3.5%.

FHA Recent Loan Changes

FHA LOAN CHANGES

In February, President Bush signed a bill that made a temporary increase to both conforming and FHA loan limits. The U.S. Department of Housing and Urban Development (HUD) recently released the new limits, which range from $271,050 to $729,750 depending on the county. Previously, they were capped at $362,790. With FHA loans rising in popularity, especially among first-time homebuyers, these new limits could have a very positive impact. However, the changes are currently set to expire December 31, 2008, so you should act now to take advantage. Benefits to Homebuyers Many borrowers who were shopping in markets where entry-level homes were above the FHA loan limit may now be able to obtain an FHA loan. The most incremental change is likely to occur at entry-level and first-time move-up prices. The effects are also expected to have the greatest and most immediate impact in markets where entry-level home prices were above the previous FHA limits, such as California. According to a statement released by the Federal Housing Administration, the change in loan limits will “give nearly 240,000 additional homeowners and homebuyers a safer, more affordable mortgage alternative.”¹ Because FHA focuses on 30-year fixed rate mortgages, homeowners may be able to avoid some of the risks associated with subprime mortgage products. Click here to view the new FHA loan limits for counties across the nation. FHA: Fast Facts If you are unfamiliar with FHA loans, here are a few facts to know. One important point is that FHA does not actually loan money to the buyer. Financing is obtained through a mortgage company such as HomeAmerican Mortgage Corporation. FHA insures the lender against loss if the buyer defaults on the mortgage. The lender still has the final decision of whether or not to loan the buyer money, but having the FHA insurance can help them in making their loan decision. In addition to offering insurance to the lender, FHA loan programs can offer many benefits. These are a few of the advantages: Flexible qualification: FHA programs offer more flexible qualification, allowing more borrowers to obtain financing. Less than perfect credit: FHA loans are often more forgiving of a buyer’s credit history. For example, buyers may still be able to qualify if they’ve had a bankruptcy as recently as two years ago. Low down payment: Homebuyers typically only need 3-5% for their down payment, and this money may be a gift from a family member or other acceptable source.

What exactly is a Short Sale??? How does it work?

With the increase in foreclosures lately you may have heard the term “short sale” and wondered what it was. A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure.

When a borrower is in default on a mortgage they not only owe the back payments but also may owe late fees, property inspection fees, attorney fees, etc. This can add up quickly to eat up all the equity the borrower had in the property. If the borrower is unable to bring the account current the lender will then foreclose on the property. With a foreclosure, the lender can lose up to 40% of the mortgage amount because of the extra costs involved with foreclosing on a property: attorney fees, court costs, lost interest, eviction costs, property maintenance costs, and selling costs. Foreclosing on a property can also take up to two years in some states. Therefore, it is sometimes in the best interest of the lender to accept the short sale.

It also can be in the best interest of the borrower. They will not have to endure the time and stress of a foreclosure and their credit may not be as adversely affected as it would with a foreclosure. It is quicker and easier and does not subject the borrower to the embarrassment of a foreclosure.

SIGN UP NOW FOR A SHORT SALE OR FORECLSOURE LIST

How does it work?

The first thing the borrower should do when they can no longer afford a property is to contact the lender immediately. The last thing a lender wants to do is foreclose on the property. Lenders typically have departments that work with people who are behind on their payments to resolve the situation. If you cannot resolve the default with the lender, and you want to see if they will accept a short sale, they will direct you to the department that handles short sales.

The lender will usually require the borrower to submit a lot of information to the lender in order to consider the short sale. The information required may include:
• Income documentation such as W-2s and pay check stubs to verify the borrowers’ income.
• Bank statements to verify the borrowers’ assets
• Hardship letter – this letter will describe for the lender the reasons the borrowers are in the financial position they are in and will ask the lender to accept the short sale. Borrowers should make this letter sound as sad as possible and back up the story with any documentation you may have such as medical bills, etc.
• Fair market value for the property – depending on the lender they may require an appraisal or may accept an opinion from a local Realtor know as a Comparative Market Analysis (CMA).
• Preliminary proceeds sheet from the sale of the property. This will show the proceeds of the sale of the property after the mortgage is paid off and all other closing costs and fees are paid. This will be negative in the case of the short sale and this negative amount is the amount of the shortage.
• Listing agreement and purchase agreement when they are available.

When the lender reviews all of this they may or may not approve the short sale. If they do not approve the short sale they will proceed with the foreclosure. If they do agree to the short sale you will close on the sale of your property and the lender will take the loss.

So, is the borrower off the hook?

Not necessarily. The lender still has options to try to collect this shortage. As a condition of the short sale the lender may require the borrower to sign a note to repay the shortage. They may also file a collection or a judgment for the amount of the shortage. This is something that an attorney with expertise in this area of real estate needs to be consulted.

Also, the IRS may come after the borrowers for income taxes on the amount of the shortage. If the shortage was forgiven, the lender will report the shortage as income to the IRS and the IRS will collect taxes on this amount. Again, for the specifics on this please consult a tax professional.

FHA Makes Exception to Anti-Flipping Rule For Foreclosed Properties

Bush administration officials on Friday said they had made a major change to existing U.S. Department of Housing and Urban Development regulations for mortgages endorsed by the Federal Housing Administration, lifting a key anti-flipping provision that lenders and disposition firms have long said limits their ability to resell distressed real estate.

HUD officials said a newly-introduced temporary policy will now extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties. FHA regulations currently prohibit insuring a mortgage on a home owned by the seller for less than 90 days, a limitation designed to prevent property flipping activity.

FHA’s new policy will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing, HUD said in a press statement.

For one year, the FHA will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders; properties must purchased by owner-occupants, however, HUD said.

“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” said Brian D. Montgomery, the FHA’s commissioner. “The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country.”

Montgomery said that FHA’s new temporary policy will help stabilize neighborhoods experiencing high rates of foreclosure by reducing the inventory of unsold properties.

The FHA action comes ahead of a major announcement from HOPE NOW, the industry coalition organization by Treasury Secretary Henry Paulson late last year, that will see the industry group adopt new measures for loss mitigation.

The group has scheduled a press conference for tomorrow afternoon to detail the changes.

For more information, visit http://www.fha.gov.

4 new rules for home buyers in this Market!!

There's no guarantee that prices have hit bottom yet - but that doesn't mean that you can't get a great deal now.

There's no telling how long the housing crisis will drag on. Here's what you need to know before you start shopping in a rocky market.

Rule 1: You can't time the bottom

Face it: The house you buy today will more than likely be worth less next year. That could get you thinking about trying to time the bottom. Resist. It's harder to do than you think, and this is the best buyers have had it in two decades, with inventories up and mortgage rates low.  Pace yourself, find the perfect place and drive a hard bargain: Ignore the seller's asking price and bid 10% below what comparable homes are selling for. If the seller balks, move on. Remember that if you're trading up, your home could sit. So sell before you buy.

Rule 2: One reason to buy now - mortgage rates

Homes are plentiful and will remain so, but financing will be getting more expensive. True, the Federal Reserve has slashed interest rates, but fixed mortgages don't directly follow the Fed. They reflect the bond market's expectations about inflation, which remains a concern. The 30-year, now at 6.1%, will likely reach mid-6% by December and 7% in 2009, says Celia Chen of Moody's Economy.com. That means there could be a penalty for waiting to buy even if prices fall more. Today a $250,000 loan would set you back $1,500 a month. At 7%, a $1,500 payment gets you only a $225,000 mortgage. As for variable-rate loans,

the spread between conforming ARMs and fixed loans is too narrow to do you much good.

Rule 3: Another reason to buy - rates on big mortgages

Mortgages in amounts greater than $417,000 - the limit for buying by federally sponsored mortgage agencies – usually run a fifth of a percentage point above conventional products. But investors are shunning jumbos, which now average 7.2% and are unlikely to drop much this year, according to HSH Associates.

Certain jumbo borrowers could get relief, however. A new law allows Freddie Mac and Fannie Mae to buy loans as large as $729,750 in 71 high-priced areas. So far "jumbo conforming" loans average 6.6%. The program has gotten off to a slow start; you'll need to shop around. And unless Congress acts, this bargain will disappear at year-end.

Rule 4: Don't buy cheap; buy good schools

By now you've heard from somebody who knows somebody who got a great deal on a foreclosed property. But when you buy a house, you're also buying into a neighborhood. And foreclosures tend to be bunched in areas where residents and speculators alike took out exotic mortgages to get into homes they subsequently found they couldn't afford. That's not a recipe for stability. Prices and quality of life could both decline further.

Latest real-estate fad: Hunting for foreclosure deals

During the housing boom, investors flocked to metro Phoenix and climbed onto buses that took them to the Valley's fringes, where they checked out affordable new homes they could buy low and sell high.

Now, the bus tours to those edge suburbs are starting again. But this time, home buyers are looking for foreclosure properties they can flip for a fast profit.

The Valley's foreclosure-buying spree started with auctions last fall. Late-night infomercials turned from buying homes with little down to foreclosure-investing. Daylong foreclosure-investing seminars in Valley hotel conference rooms, including sessions held by Trump University, began filling up in January. Smaller bus tours put on by local real-estate agents are going on most weekends now, and a national group called Foreclosure Bus Tours today will hold its first daylong event in the Phoenix area.

"Foreclosure-investing is the real-estate buzzword now," said Eric Brown, a former Phoenix home builder who is a managing director of real-estate consulting firm Robert Charles Lesser & Co. "Huge investment companies and individuals are looking to pick up properties cheap."

Foreclosure Bus Tours has shuttled investors around Detroit, Fort Lauderdale, Fla., and Boston, and it has tours planned in Dallas and Houston as well as Maryland and Connecticut. For $97, investors get lunch and check out several foreclosure properties. Usually, a local real-estate agent and mortgage broker is on the bus to get deals going.

"There's a lot of interest in Arizona foreclosures," said Rodney Townsend, who started Foreclosure Bus Tours in Detroit with partner Ralph Claxton. He said a man and his sister from Boston are flying to Phoenix for this weekend's tour to try to find a home for their mother.

(Interested in the latest Foreclosures or Short sale list of homes in the Phoenix Area? Email me now at db@azrealtypros.com or call 623-776-6966 for an immediate list)

Foreclosures on rise

Lenders won't deal