Ask the Arizona Real Estate Expert

Do you have a Real Estate related question?  Submit your questions regarding Real Estate in Chandler Arizona or Gilbert Arizona and we will promtly provide you with an no obligation, no hassle answer.  If we decide to use your questions here on our website, you will receive a fabulous free gift from us.  So ask away and ask often, we would love to hear from  you.    

Scroll down to read the answers to some recent questions.

      •      What is tax-deductible when buying a home?
             Why Didn't That House Sell?
             Appraisal Came in Below the Purchase Price....
             What are Mortgage Points?

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To:  Zack Alawi, Designated Broker

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What is tax-deductible when buying a home?

When you buy a home, you can generally deduct origination and discount points, interest you pay during the year, and property taxes. When refinancing, points are not deductible; instead of you have to 'depreciate' them over the life of the loan. Other closing costs (such as the cost of the appraisal, inspection, credit report, etc.) are not tax-deductible, regardless of whether you are buying or refinancing. The down payment is not tax-deductible either. One detail that may surprise you - when you are buying a home, you can deduct the points even if the seller pays them. Isn't that nice??

These are general rules-of-thumb, and they might be different for you, depending on your situation (your income level, the purpose of buying the home, etc.) Consult your CPA for specific guidance.

Four Reasons Why That House Didn't Sell

Boy, are you lucky you are not the seller of that house. You know the one—it’s been sitting on the market for so long that you forgot what it looked like without the For Sale sign in front of it. They decreased the price several times, there are people stopping by to look at it, but the stubborn For Sale sign remains. You feel bad watching the poor Realtor holding it open to no avail.

What gives? Well, it could be:

Its Price

There are soooo many reasons why setting the listing price too high is a bad idea. Fewer buyers will even want to look at the home. Fewer Realtors will bother showing it. Buyers who can afford the higher price will want a bigger, better home. Buyers who would want that home will not be able to afford its price. An overpriced home almost always ends up sitting on the market for too long, the seller needlessly ends up paying months of additional mortgage payments, and then is usually forced to sell the home for less than its fair market value.

Why, oh, why then overprice it? Different sellers have different reasons, but they ultimately have one thing in common: they are counting that a clueless buyer will show up and pay what is asked. Fortunately for the buyer, there is the Internet. And there are the buyer’s agents. Today’s homebuyers are more informed than ever before, so sellers who overprice their homes should brace for a long, long time on the market. Also considering our current market, there are hundreds of homes available in a Buyer's price range, why would they go over their range?

Its Location

There should be no surprise here—the location of a home is extremely important. A home closer into town, like in Ahwatukee, will have a better chance of selling than a home further out, like in Queen Creek.  Personally I like the homes in Chandler and Gilbert - a nice in between location.  And when I say location, I don’t mean only the part of town that the home is in, but its immediate surroundings as well. If the neighboring properties are unkept, with overgrown lawns and peeling paint, your home’s appeal will decrease as well.  Unfortunately, there is little to be done about the home’s location (unless the home has wheels), so usually the only remedy is to price it properly. Remember, there’s a buyer for every home, if the price is right.

Its Condition

There once was a time when people actually had free time. It seems that we didn’t work quite as much as today, moms didn’t have to schlep kids from one after school activity to another all the time, and days just seemed to have more hours. So it was no wonder that there were families who bought fixer-uppers, and working in their free time little by little, remodeled the ugly ducklings into beautiful swans.  But today’s buyers are different. People are so busy that very few have time (or desire) to do this. The only folks actively looking for fixer-uppers are investors searching for bargains. Regular buyers are looking for homes that are in sparkling condition and ready to move into.  What usually gets sellers in trouble here is not that they don’t want to prepare their home for sale properly, but when you live in a home for a long time it becomes hard to be objective about its condition. In other words, what a longtime occupant of the home considers a perfectly acceptable condition may not be acceptable to someone seeing it for the first time. This is why it’s a good idea to have a neutral third party look at the home first and suggest improvements before it goes up for sale. I, for example, offer this type of service for free to homeowners in our area. Checklist in hand, I walk through each room and recommend cost-effective improvements that can maximize the home’s value and minimize the time on the market.  Everyone thinking of selling soon should have a similar “checkup” performed. That includes both inside and outside 'check ups'.

Its Marketing

Have you heard of the 3-P marketing strategy? Put the sign in the yard, Place the listing in the MLS, and then Pray.  As you can imagine, in our noisy world this marketing “plan” is not enough to attract enough qualified buyers. This is why sharp listing agents will have aggressive marketing plans that will include a number of different methods of advertising, such as the MLS, the Internet, print ads, open houses, broker tours, local mailings, brochures, networking with other agents, working with relocation services, etc. The more exposure the home gets, the better. Wise sellers discuss the agent’s marketing plan before listing the house, and hopefully get it in writing.  With more than 80% of home Buyers turning to the Internet to look for homes, a tech savvy agent with a true internet presense will be a home seller's best ally.

The bottom line is—there’s a buyer for every home. If a home is not selling, an honest re-evaluation of its price, location, condition and marketing should reveal the underlying cause and enable the seller to take corrective action.

With almost 39,000 Active Homes for Sale in the Valley, and 2,600 in Chandler, and another 2,600 in Gilbert, the competition is stiff.  Your home must stand out, both in appearance and price, compared to all the rest. 

Appraisal Came in Below the Purchase Price....

Question: What are my options if the house that I am buying in Chandler or Gilbert AZ appraises for less than the purchase price?

Answer: Your loan amount is based on either the purchase price or the appraised value of the home, which ever is LESS. What happens if the appraisal comes in lower than than the purchase price should be clearly spelled out in your purchase contract.

Typically you would start by asking the seller to lower the price to match the appraised value. If the seller is unwilling to do this, and if you really like the house, your second option is to come up with the difference between the appraised value and purchase price with cash.

Your third option is to cancel the contract and look for another home. But this can be done legally only if there is a clause in your contract that clearly gives you the right to do so. This clause is usually called the loan contingency or the appraisal contingency.

A good Buyer's Agent with valuable experience in the Chandler Arizona Real Estate market would make sure this contingency is in your contract from the very beginning.  Another good reason why having your own Buyer's Agent is so important.  But don't think that having a Buyer's Agent will cost you money - because with the myREALpro Team it won't cost you any money!  Our fees are paid by the Seller's Agent.   Why do it alone when you can have myREALPro by your side? 

What are Mortgage Points?

Let’s demystify these “points” you hear about in every mortgage commercial you see or read. Points are a type of fee borrowers typically pay up front in connection with obtaining a loan. One point (short for “percentage point”) is equal to 1 percent of the loan amount. For example, on a $150,000 loan, one point would cost $1,500. ($150,000 x .01)

Now there are two types of points: Origination Points and Discount Points. Origination points are charged in order to cover the lender’s cost associated with issuing you the loan. The number of origination points charged may vary from lender to lender, and can sometimes be negotiable. The more difficult and time consuming issuing the loan is for the lender, the more you might pay. Discount points have a different purpose. They are designed to lower your interest rate. As a rule of thumb, paying one discount point will lower your interest rate by 0.25 percent on a fixed-rate mortgage. It will vary from loan to loan however. For example, a lender may offer you a mortgage with 6.50 percent interest rate and zero discount points, or 6.25 percent if you pay one discount point, or 6.00 percent if you pay 2 points, and so on. Furthermore, you can agree to pay points to lower the rate to something more agreeable. That is something you should also keep in mind especially if your closing costs are covered by the Seller or New Home Builder. Again, please note that this is just a general rule, and the actual cost of reducing the interest rate fluctuates with the market and type of loan.

Discount points can also be “negative.” In the above example, 6.50 percent was the interest rate you would get if you opted to pay zero points. But if you agreed to a higher interest rate of 6.75 percent, then the lender would pay you one discount point. You would not receive this amount in cash, and you would not be able to use it toward the down payment, but you could use it toward your closing costs. This type of loan is often referred to as a “premium loan.”   The no-points and no-closing- cost loans you see advertised on TV and on the Net usually fall into this category. You pay a higher rate, but your closing costs are covered. 

I recently showed homes in Chandler, Gilbert, and Queen Creek where the New Home Builder was paying for the buyer’s entire closing costs. They offered such a large incentive that there was even money for the buyer to reduce the interest rate he was offered by paying a Discount Point.  If you have been thinking of buying but were told you couldn’t buy, especially if you didn’t have enough funds to cover your closing costs – give me a call. I will gladly explain any of the information I provided here and review your situation specifically to see if there is anything I can offer to help you. Not all agents and lenders are familiar with all the options out there for home buyers. In the Real Estate industry you really have to have the right people, who have knowledge and experience, to help guide the way.