Buying investment properties in Tucson, Arizona (AZ) makes sense today because the market is in a serious temporary downturn. Thirty-six to forty-eight months from now, I think there will be many people saying, “Wow, three years ago was the time I should have bought that first or tenth rental property.” Here’s the reason I think it makes sense currently.

I wanted to write about the mortgage crisis that has been ongoing for the past 4-5 weeks. In Tucson, one of the largest mortgage brokerages in the nation (private banks), First Magnus, went out of business due to the lack of liquidity in the secondary markets. They could not sell off the packaged loans that they had made to borrowers, which then get resold to Wall St. The closure of First Magnus, in my opinion, has put a lot fear in the local Tucson real estate marketplace. Many buyers whom I have spoken with within the past few weeks since the closure of First Magnus have second thoughts about actually deciding to make a purchase. Also, First Magnus laid off roughly 600 employees when they went out of business, and that alone has shocked the Tucson mortgage business.

Negotiating in real estate is where the “rubber meets the road.” Anyone can find a home they like, but it comes down to negotiating the best deal for yourself and saving the maximum money possible. In Tucson Arizona (AZ), when negotiating real estate prices with Tucson home builders (including the surrounding areas of Marana, Oro Valley, Sahuarita, and Catalina AZ) here are a few tips to assist you in getting the best deal possible.

“Paying Points” when buying a mortgage is one of the least understood and most confusing parts of buying a house and deciding what loan to get. Here’s a simple description of what “paying points” (sometimes refered to “buying points”) is. When you are obtaining a mortgage, a rate is assigned for that type of mortgage. The rate varies from day to day according to fluctuations in the markets. We will use the example of a 30 year fixed (the most common loan for residential purposes). Lets say the loan officer qualifies you for a rate of 6.5% over 30 years fixed for a loan amount of $250,000. The payment for that loan (mortgage) would be $1580/month (interest and principle). Taxes and insurance are not included in this example. You would like to get the payment a little lower, as it is more comfortable for you to pay closer to 1500/month. So you have two choices: 1) you could put more money down, which would cost roughly $10,000, making your loan amount $240,000; or 2) you could “buy points” to “buy the interest rate down.” One “point” is equal to 1% of the LOAN AMOUNT — not purchase price. Now, if you’re still with me hang on. This is where people get confused. Because every loan is unique, and this example is for just the absolute average loan, your results will vary. OK, back to the current example. If your quoted rate is 6.5%, to get a $1500/mo mortgage payment you will need to bring that down to a rate of 6.0% (brings the payment in at $1498/month). To get that rate you will need to “buy it down.” On average, buying a “point” or 1% of the loan amount will reduce your rate roughly 0.125%-0.5%. Let’s use 0.25% as the example. So you will need to pay 4 points or $10,000 to buy the rate down to 6%. Now you may be asking yourself why you would want to pay 10k to buy points when you could just reduce the loan amount 10k and be at the same payment. Here’s the answer: The 0.5% extra you will be paying on 240K loan amount will be for over 30 years. On average, that’s an additional $1200 a year in interest! Over 30 years, it’s in excess of $36,000 over the life of the loan vs. the 6% with the loan amount of $250,000. That’s a grand total of roughly $26,000 over the life of the loan! $10,000 (cost of points) and $36,000 (additional interest paid over 30 years) = $26,000 in total savings. Now all these numbers presume you live in the property for 30 years. The vast majority of buyers don’t, so if you’re wondering, it would take about 10 years before your “buying points” would start to save you money over taking the 10k and applying it to the loan amount. As you can tell, this is a very complex situation when getting a loan or buying a home and every situation is completely different. Your real estate agent and loan officer should be consulted when deciding whether “buying points” is a good option for you. I do provide on my website at www.SellingTucsonRealEstate.com many financial calculators in the “financing” section (top left side) which can help tremendously to show exact figures for you.

When deciding to sell your home, one aspect of getting the highest price the market will bear is making it have a sparkle to it none of the other homes in the market for sale have. As a seller, you can get that sparkle through hiring a home stager to completely transform your property into a model property for sale. Think about this: just about every home builder in America uses model homes to help them sell homes. They typically upgrade the homes heavily to show every option and then some to make the home have that sparkle that gets buyers to decide this is the one for them. Getting to the emotion of buyers sells properties many times. (It goes without saying that the home must be priced within reason to get anyone to want to look inside it.) Home staging gets your home in its best possible condition and presentation. The home is “staged” to enhance positives and also “staged” to distract from negatives. For instance, if the bedrooms are a little smaller then the average home in the neighborhood, a great stager will get furniture that will “fit the room” — not the other way around — making the bedrooms feel bigger. Great stagers also will make sure there is a general theme to the home that will get to buyers’ emotions. If, for example, the neighborhood is very close to schools and parks, a great stager will incorporate these into the home staging. They might decorate with small furniture (or children’s furniture) and puzzles and games on display to get children excited about the home when they go to see it with parents. On the other side of the coin, maybe your home is situated in a world class golf resort. A smart home stager would use golf themes throughout the home, playing the percentages that a golfer may be looking in that specific area. It’s all about getting potential buyers to imagine and “take ownership” of the property when viewing it. When doing all this, the benefit to the sellers — even if they happen to not have children (as in the first example, or don’t golf in the second example) — is that when it comes to the offer and the negotiations, the buyers will be much more hesitant and less likely to “lowball the offer”. If you counter, they will much more scared of losing the home. This should all result in the home selling for a higher price and also selling more quickly. From all the research I have done, I cannot find a set average that staging a property in Tucson AZ will add to the sales price, but from experience and general research, 1-5% is a very reasonable figure to use as a guide. A lot depends how well your home shows without staging and how much work the stager has to do to the home. Rates for staging in Tucson AZ vary from $250 for just a general consultation with the stager to $10,000 or more for an entire house of furniture, painting, and other home upgrades to get your home in showcase condition. If you are in need of a stager, or would like additional information about staging and getting your home in showcase condition feel free to contact me.