Arizona Real Estate Looks Grim for 2-5 Years - Which Means So Do A Lot of Things

I attended the SYEP (Scottsdale Young Estate Planners) Meeting this afternoon. A local realtor shared some info that is supported by what I've seen from many other sources including my clients in the Real Estate business and in related businesses from fine dining to dry-cleaning:

-The next 2-5 years in local RE market will be ruled by short sales;
-FEDs are pushing banks to allow and work with more short sales;
-Lending is happening but mostly under the $400K (jumbo loan) limit;
-50% of AZ homes are underwater;
-Less than 5% of loan mods are working;
-The Tax Credit only worked primarily on homes under $400K;
-Inventory is slowly being absorbed and fewer homes are hitting the sale market (rentals?);
-All income levels are in trouble, but big homes in Paradise Valley are suffering the most - some are at 50% discount;
-Don’t plan on making money on "flipping". The local properties are all being bought up by syndicates that are making close deals and keeping individual players out of the market - they will outbid you on the courthouse steps.

Personally, I'm concerned about what's coming next year, when all the 5 year A.R.M.s written in the 2006 buying frenzy all mature and can't be re-financed, and will trigger a second massive wave of foreclosures and walk-always in the Phoenix metro area.

Those affected include builders, developers, and all others who make their living off the sales, maintenance and furnishing of new homes, from AC service to the pool guy.

I'd guess the consignment furniture business will be big along with mini storage and residential rentals for those out of their homes. It will be great time to be in debtor-creditor law, bankruptcy, debt settlement and credit repair.

Those in businesses that are logically related need to take a good long look at their assets, expenses, liabilities and legal and financial planning ASAP while they still have legal, cost effective options available. It will be too late when you really feel the pinch.

Those that are prepared will be in a great spot to take advantage of a buyers market and emerging opportunities and cash, AS ALWAYS, will be king. For more thoughts on getting ready for the flood - see what I sent my clients in Dec 07, and every year since, here: 2010 Business Survival Plan - http://arfinance.blogspot.com/2009/10/2010-business-survival-plan.html

Ike

Understanding the Arizona Anti-Deficiency Statutes and What they Mean to YOU

We have many questions and conflicting interpretations of the Arizona Anti-Deficiency statutes and what they really mean and do. For clarification I turned to Attorney Neal Bookspan who is a partner at Phoenix law firm of Jaburg & Wilk and who handles a variety of business, bankruptcy and litigation issues. A link to Neal’s profile can be found by clicking here: ABOUT ATTORNEY BOOKSPAN and I have included some basic contact info for him below as well.

Neal, thanks for your help on this issue. Here’s what Neal had to share:

Ten Truths Regarding Arizona's Anti-Deficiency Laws

1. Arizona's anti-deficiency statutes only provide protection to borrowers on residential property, not commercial property, industrial property or raw land.

2. The Arizona anti-deficiency statutes are A.R.S. §§ 33-729(A) and 33-814(G). Section 33-729(A) applies to purchase money mortgages (when is the last time anyone saw a "mortgage" document used in Arizona??) and purchase money deeds of trust that are foreclosed judicially. Section 33-814(G) applies to deeds of trust foreclosed through a trustee's sale. Almost all deficiency issues in Arizona arise under § 33-814(G).

3. Under either statute, the threshold question is whether the property at issue is "two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling." Under the existing case law the dwelling must be built and at least occasionally occupied.

4. The property may be "occasionally occupied" by the owners or rented to third parties and qualify for anti-deficiency protection.

5. Arizona's anti-deficiency statutes apply to second priority mortgages and deeds of trust if they are purchase money obligations. Non-purchase money mortgages and deeds of trust are not protected by Arizona's anti-deficiency statutes.

6. If a purchase money mortgage or deed of trust subject to Arizona's anti-deficiency law is extended, renewed, refinanced, or worked out, the loan retains its status as purchase money and the borrower remains protected by Arizona's anti-deficiency law.

7. To obtain a deficiency judgment after a trustee sale, an action must be brought within 90 days after the sale. If an action is not brought within this time period, the right to a deficiency is lost pursuant to A.R.S. § 33-814(D).

8. The Arizona anti-deficiency statutes are applied both against and to protect guarantors in the same manner they are applied against and protect borrowers.

9. Lenders may continue or postpone trustee's sales. This may be done an unlimited number of times and the only notice given of the new time and place for the trustee's sale is by public declaration at the time and place of the scheduled trustee's sale.

10. Where a deficiency is permitted, the sale of the underlying property results in a credit against the amount of the judgment in an amount equal to the higher of the fair market value of the property or the sales price obtained at a public sale. If a request is made within 30 days of the foreclosure, a judgment debtor may seek to have the court determine the fair market value of the property.



ABOUT GUEST COLUMNIST ATTORNEY NEAL BOOKSPAN

Email: nhb@jaburgwilk.com
Phone: 602-248-1000
Practice areas:Bankruptcy Construction Law Corporate Transactions Creditor's Rights

Remember, the best we can do here is general info - NEVER - specific legal advice, so call Neal for help that is fact specific to you.