Wednesday, April 30, 2008
Our HouseMaster-Phoenix Crew
Tuesday, April 29, 2008
Phoenix Couple Struggles to Hold On To Several Investment Properties
Editor's Note: We'll be periodically checking in with home sellers, owners, buyers and investors who have been affected by the cooling real-estate market.
The Investors: Donna Butera, 47 years old, a home-staging professional, and her husband, Mark Butera, 45, a contractor, in Phoenix. The Buteras got started in real-estate investing in 2001, and to date, have turned a profit on 12 properties that they have renovated and sold.
One of the Phoenix investment properties
The Investment: In 2005 the Buteras bought six properties -- four single-family homes in Phoenix, plus a house and condo in Scottsdale, Ariz. With the exception of the condo, which they intended to use as a short-term vacation rental, they had hoped to quickly renovate and sell the other properties.
Each property was priced between $200,000 and $250,000. They financed all six with zero-down, adjustable-rate mortgages (ARMs), with rates of about 6% that reset to 11% to 13% after one year.
Current status: The Buteras were unable to sell their homes in the softening real-estate market (see "Phoenix/Scottsdale by the Numbers"). They stopped making payments – a total of $17,000 – on all their investment properties in July 2007.
Since January, they have lost two properties to foreclosure, sold one home at a break-even price, and are in danger of foreclosing on two Scottsdale properties and one in Phoenix.
They are renting out their three remaining homes for between $1,500 and $1,850 a month, but each home requires a monthly mortgage payment of $2,400 to $3,200.
Losses: At least $150,000 over the past two and a half years. The couple's credit score has plummeted below 500. (Above 700 is considered good.)
Background: Ms. Butera says that two of the properties she and her husband bought required major remodeling and that her husband planned to do the fixes himself. However, once work began, he realized the homes would require extensive work that would take longer than anticipated – one had water damage and the other termites.
By the Numbers
Local Market: Phoenix/Scottsdale
Median home price: $263,600 for single-family homes in March 2008; $195,000 for condos in March 2008, according to the Arizona Multiple Listing Service (ARMLS). This is down from a median price of $335,000 (single-family homes) and $201,400 (condos) in March 2005. (See more median price data.)
Inventory: Maricopa County, which includes Phoenix and Scottsdale, had 51,499 listings at the close of 2007, up 72% from 29,934 listings at the close of 2005, according to data from ARMLS. The area had the fifth highest foreclosure rate in the U.S. during the fourth quarter of 2007, according to Hendricks & Partners, a real-estate research firm.
Average days on the market: 118 days (condo), 102 days (single-family homes), as of March 2008, according to ARMLS. In March 2005, single-family homes averaged 33 days and condos averaged 37 days, according to ARMLS.
Rental vacancy: 9.1% for the year ended Sept. 2007, up from 6.8% in 2005, according to Hendricks & Partners.
In February 2005, Mr. Butera had a heart attack and had to stop work for several months. To pay for Mr. Butera's health care and recovery, the Buteras refinanced to new ARMs for five of their six investment homes, pulling out about $200,000 in cash. The new ARMs had more outstanding loan principal and higher rates (8% to 9%), which reset after one year to 11% to 13%.
In 2006, by the time Mr. Butera completed $120,000 worth of work on the two remodels, the market had soured. The Buteras listed all their properties for sale, except for their vacation condo, but none sold, so they rented out the properties.
In 2007, Ms. Butera says that they were facing carrying costs of up to $10,000 per month. They sought better terms on their loans and were told by two of their lenders that unless they stopped making payments, they couldn't begin any sort of workout on their loans, Ms. Butera says.
The couple stopped making mortgage payments on all but their vacation condo in July 2007.
They're now awaiting responses from three lenders -- Chase Home Finance, Countrywide and Litton Loan Servicing -- concerning their requests for loan modifications on the three properties they still own, Ms. Butera says. (Calls to Countrywide were not returned, while Chase offered no comment and Litton said they couldn't comment on the case without written permission from the borrower.)
Investor Donna Butera
Future Outlook: "If it were any other market, our houses would have been taken and resold by now," she notes.
Despite everything, the Buteras are determined to make things work. "I'm not turned against the real-estate market," Ms. Butera says. "We wouldn't be holding on to the three properties we have if we weren't believers."
They've been able to stay current on the $3,500-a-month mortgage on the home where they live in Phoenix. Plus, Ms. Butera says, lenders who offered the mortgage products they used to finance their investments (zero down and adjustable rate mortgages) are now more open to working with clients who were caught short in the downturn.
As for other investors underwater in their mortgages, she recommends talking to lenders as soon as possible to avoid foreclosure.
The Investors: Donna Butera, 47 years old, a home-staging professional, and her husband, Mark Butera, 45, a contractor, in Phoenix. The Buteras got started in real-estate investing in 2001, and to date, have turned a profit on 12 properties that they have renovated and sold.
One of the Phoenix investment properties
The Investment: In 2005 the Buteras bought six properties -- four single-family homes in Phoenix, plus a house and condo in Scottsdale, Ariz. With the exception of the condo, which they intended to use as a short-term vacation rental, they had hoped to quickly renovate and sell the other properties.
Each property was priced between $200,000 and $250,000. They financed all six with zero-down, adjustable-rate mortgages (ARMs), with rates of about 6% that reset to 11% to 13% after one year.
Current status: The Buteras were unable to sell their homes in the softening real-estate market (see "Phoenix/Scottsdale by the Numbers"). They stopped making payments – a total of $17,000 – on all their investment properties in July 2007.
Since January, they have lost two properties to foreclosure, sold one home at a break-even price, and are in danger of foreclosing on two Scottsdale properties and one in Phoenix.
They are renting out their three remaining homes for between $1,500 and $1,850 a month, but each home requires a monthly mortgage payment of $2,400 to $3,200.
Losses: At least $150,000 over the past two and a half years. The couple's credit score has plummeted below 500. (Above 700 is considered good.)
Background: Ms. Butera says that two of the properties she and her husband bought required major remodeling and that her husband planned to do the fixes himself. However, once work began, he realized the homes would require extensive work that would take longer than anticipated – one had water damage and the other termites.
By the Numbers
Local Market: Phoenix/Scottsdale
Median home price: $263,600 for single-family homes in March 2008; $195,000 for condos in March 2008, according to the Arizona Multiple Listing Service (ARMLS). This is down from a median price of $335,000 (single-family homes) and $201,400 (condos) in March 2005. (See more median price data.)
Inventory: Maricopa County, which includes Phoenix and Scottsdale, had 51,499 listings at the close of 2007, up 72% from 29,934 listings at the close of 2005, according to data from ARMLS. The area had the fifth highest foreclosure rate in the U.S. during the fourth quarter of 2007, according to Hendricks & Partners, a real-estate research firm.
Average days on the market: 118 days (condo), 102 days (single-family homes), as of March 2008, according to ARMLS. In March 2005, single-family homes averaged 33 days and condos averaged 37 days, according to ARMLS.
Rental vacancy: 9.1% for the year ended Sept. 2007, up from 6.8% in 2005, according to Hendricks & Partners.
In February 2005, Mr. Butera had a heart attack and had to stop work for several months. To pay for Mr. Butera's health care and recovery, the Buteras refinanced to new ARMs for five of their six investment homes, pulling out about $200,000 in cash. The new ARMs had more outstanding loan principal and higher rates (8% to 9%), which reset after one year to 11% to 13%.
In 2006, by the time Mr. Butera completed $120,000 worth of work on the two remodels, the market had soured. The Buteras listed all their properties for sale, except for their vacation condo, but none sold, so they rented out the properties.
In 2007, Ms. Butera says that they were facing carrying costs of up to $10,000 per month. They sought better terms on their loans and were told by two of their lenders that unless they stopped making payments, they couldn't begin any sort of workout on their loans, Ms. Butera says.
The couple stopped making mortgage payments on all but their vacation condo in July 2007.
They're now awaiting responses from three lenders -- Chase Home Finance, Countrywide and Litton Loan Servicing -- concerning their requests for loan modifications on the three properties they still own, Ms. Butera says. (Calls to Countrywide were not returned, while Chase offered no comment and Litton said they couldn't comment on the case without written permission from the borrower.)
Investor Donna Butera
Future Outlook: "If it were any other market, our houses would have been taken and resold by now," she notes.
Despite everything, the Buteras are determined to make things work. "I'm not turned against the real-estate market," Ms. Butera says. "We wouldn't be holding on to the three properties we have if we weren't believers."
They've been able to stay current on the $3,500-a-month mortgage on the home where they live in Phoenix. Plus, Ms. Butera says, lenders who offered the mortgage products they used to finance their investments (zero down and adjustable rate mortgages) are now more open to working with clients who were caught short in the downturn.
As for other investors underwater in their mortgages, she recommends talking to lenders as soon as possible to avoid foreclosure.
Labels: Phoenix; Foreclosure; Inspection
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