A US Department of the Treasury press release today announced a series of enhancements to the Home Affordability Modification Program (HAMP) aimed at helping some of the 11 million households whose homes are worth less than the full value of their loans.  

The program changes can be broken into three parts:

1.     Temporary assistance for unemployed homeowners while they look for jobs,

2.     Financial incentives for lenders to lower the principal balance of loans for borrowers with negative equity, and

3.     If all else fails, financial incentives for both lenders and borrowers upon the completion of a short sale.

Part one, temporary assistance for unemployed homeowners, will be great for those who are temporarily unemployed.  If you can’t find a job within six months, however, skip straight to part three as you won’t be eligible for a modification unless you can prove your ability to make the new, lower payments. 

Part two, financial incentives for lenders to write down the principal balance, may benefit a targeted group of eligible homeowners with negative equity.  The program enhancements may encourage banks to write down the principal balance of the loan(s) to as low as 115% of the current market value.  The write-downs will take place in three equal amounts spread over a period of three years.  

If the market were to stop declining today and start appreciating at the historical average of about 5% per year, these homeowners will theoretically be close to their "break-even" point at the end of the three years.  (It will probably take another year or two of appreciation before they will be able to sell and break even after closing costs.)  Great news for eligible homeowners in markets that have stopped declining.  Unfortunately, Arizona isn’t one of them . . . at least not yet. 

To fit into the “targeted group of borrowers,” one must live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly payments that are greater than 31 percent of their income and demonstrate a financial hardship.  This means investors and speculators will be excluded, as will those living in million dollar homes or those who own vacation homes.  In addition, the program excludes those who “simply will not be able to afford to stay in their homes because they bought more than they could afford,” although it doesn’t specifically define who those people are. 

Let’s take a closer look at how realistic a principal write-down will be even for those who do fit into the “targeted” group.  The Treasury's HAMP Fact Sheet states that there will be a

“Requirement for all servicers to consider an alternative modification approach including more principal write-down for HAMP-eligible borrowers that owe more than 115 percent of the current value of their home.”  In addition, “Servicers will be required to run the standard NPV and an alternative NPV that includes incentives for principal write-down and compare the results.  If NPV is higher under alternative approach, servicer will have option to use it.”

"NPV" stands for “net present value” -- an accounting technique designed to estimate the long term profitability of a venture.  The new HAMP guidelines will require lenders to consider the net present value of government financial incentives for writing down the principal balance of a loan compared to business as usual.  The lender would then have the option to choose the principal write-down alternative, if it seems like a better deal.

It will be interesting to see how the "requirement to consider" plays out for Arizona homeowners.  Since those who purchased here during the “boom” years of 2004-06 typically have between 40-60% negative equity today, the write-down to 115% of current market value is going to be pretty significant for the banks.  We aren’t talking about homeowners who are $20,000, $30,000 or even $50,000 upside down in their homes.  We’re talking about negative equity of $100-$200,000 for homeowners who purchased homes in the $200-$400,000 price range five years ago. 

The HAMP Frequently Asked Questions page says that

“principal write-down will not be required. However, we are providing increased financial incentives and expect that where principal write-down yields a greater economic benefit, based on the net present value (NPV) test comparison, lenders will generally choose to pursue the principal write-down option.”

Will write-downs of $100-$200,000 yield a greater "economic benefit" for the banks - even with government financial "incentives" - than crossing your fingers and hoping the borrower continues to pay?  I guess that remains to be seen.

Another important factor to consider with regard to principal write-downs is the existence of second (subordinate) liens.  The Treasury's HAMP Fact Sheet states that

“Additional guidance will address the treatment of second liens where applicable, which must also agree to first extinguish principal in conjunction with any principal reduction on the first lien.  The new payoff schedule allows servicers to increase the maximum payoff to subordinate lien holders to 6 percent of the outstanding loan balance and doubles from $1,000 to $2,000 the incentive reimbursement that is available to investors for subordinate lien payoffs, subject to an overall cap of $6,000.”

In other words, second lien-holders will get no more than 6% of the outstanding balance as an “incentive” to write off the other 94% of the balance.  This means that even if the primary lien-holder agrees to write down the principal, you’ll have to get your second lien-holder to agree to a 94% loss before you will be granted a modification.  This might be a possibility for those with purchase money second liens where the borrower is protected by the Arizona anti-deficiency statute (although the write-down will still have a negative impact on your credit).  However, for non-purchase money second liens (HELOCs and cash-out refi’s), the lenders may not be so quick to cooperate given their option to sue on the promissory note even if the borrower forecloses.

Part three of the new program, financial incentives for short sales, may end up being the best option for those with non-purchase money second liens.  In a short sale, you can negotiate a settlement or an unsecured promissory note to avoid being sued by the bank for the deficiency balance if you simply walk-away.  In addition, you’ll be entitled to “relocation assistance” of $3,000 courtesy of our tax-payer funded TARP funds through the new HAMP program - assuming you fit into the “targeted” group of homeowners. 

A short sale may also be the best – or only – alternative for those whose lenders choose not to write down their principal balances even after the government requirement to consider the option has been fulfilled.  For homeowners, the other alternatives are to walk away and allow the property to foreclose or to “wait it out” and hope that an optimistic 5% annual appreciation starts today so you can get to that “break even” point in what, for most Arizona homeowners, will be between 10 and 15 years.

For more information about your options and a free, no-obligation consultation, please email Christie Giannetto, REALTOR^®/Owner www.AZShortSaleTeam.com.

If you are an Arizona homeowner with negative equity and are considering a short sale, you probably have a lot of questions.  The answers to the most commonly asked questions vary widely based on each person’s unique circumstances and it is important that you educate yourself and understand the process before making a decision about pursuing a short sale. 

Please take some time to read through the Arizona Short Sale Team frequently asked questions pages.  If you would like to schedule a free, no obligation consultation with a member of the Arizona Short Sale Team, please fill out the form at the bottom of the FAQ pages.  We will be able to answer all of your questions based on your individual circumstances and help you make the decision that is best for you.

Definition of a short sale:

A short sale is the process of selling a property for less than what is currently owed on the loan(s) and negotiating with the lien-holder(s) to accept the proceeds of the sale and forgive or settle the remaining debt (deficiency balance).

Short sales are used when the amount owed on a property is more than its fair market value in the current market.  By accepting a short sale, the lender avoids the lengthy and costly process of foreclosing on the property.

Click here for more information and the answers to other Frequently Asked Questions about Short Sales.

Governor Jan Brewer recently signed HB 2008, which repeals SB 1271 and the changes to the anti-deficiency statute that were set to take effect at the end of this month.  This is good news for Arizona Homeowners, especially those with negative equity who may be facing foreclosure and are considering the option of a short sale. 

As a REALTOR® specializing in short sale negotiations, clients often ask if they will be required pay back the difference between what they owe and what their home will sell for in the current market.  The difference, also called “deficiency,” is the amount of debt remaining after a property is sold for less than the current balance(s) on the loan(s).  For example, a seller that purchased a home in 2005 with “100% financing” might have two loans for $240,000 and $60,000, totaling $300,000 in debt secured by the property.  In the current market, the property will probably sell via “short sale” for about $125,000 leaving $175,000 in remaining debt or “deficiency.”  Naturally, when considering a short sale, the seller wants to know if they will be required to repay all or a portion of the $175,000 in a lump sum, an unsecured promissory note or, worse, if the bank can sue them for the deficiency in the future.   

One of the greatest tools for negotiating short sales in Arizona is A.R.S. § 33-814, often referred to as the “anti-deficiency statute*.”  This statute provides an exception to the right of a debtor to recover a deficiency judgment after a trustee sale (foreclosure) for any single family home or duplex on 2.5 acres or less.  What this means, in laymen’s terms, is that if you foreclose on a regular, single family home on a regular sized lot and the bank ends up selling the property for less than you owe, they can’t come after you for the difference.  This is a powerful tool when negotiating a short sale because if your lenders know they can’t sue you for the deficiency later on, why would they bother to foreclose on the property, hire their own REALTOR®, deal with marketing, maintenance and repair costs, etc., only to end up selling the property for the same amount or less than they are being offered in the short sale?  Deficiency laws vary by State and since Arizona has had one of the most rapidly declining real estate markets in the country for the past four years, it’s fortunate that we are an “anti-deficiency” State. 

The Arizona State Senate recently passed SB 1271 which would have made significant changes to the Arizona anti-deficiency statute*, including amending the law to require a certificate of occupancy on the property and that the trustor (also the owner, seller and borrower in most cases) must have “utilized” the property for at least six consecutive months.  Fortunately for Arizona Homeowners, Governor Jan Brewer recently signed HB 2008, which repeals SB 1271 and these changes. 

This is especially good news for those who own investment properties with significant negative equity.  Investors who may be considering a short sale on a property thay have never occupied will continue to have the same negotiating tools as other homeowners seeking an alternative  to foreclosure through the short sale process.   

If you own a home with negative equity, please contact me at Christie@AZLifestyleTeam.com for a free, no obligation consultation to discuss your options according to your individual personal and financial circumstances.  Consultations are 100% confidential and, as always, our goal is to help you determine the path that is in your best interest personally and financially, both short and long-term.

*You are advised to consult legal counsel regarding the application of the anti-deficiency statute and all other legal matters.

For all those apartment dwellers, roommate haters and those who just haven't been able to cut the cord, NOW is the time!  But time is running out . . . in fact, there about four weeks left to find a home, make an offer and have it accepted in order to close escrow by the November 30^th deadline for the $8,000 first time home buyer tax credit. 

November 30^th may seem like a long time from now, but factor in underwriting guidelines that are tighter than a pair of 1980s hot-pink spandex and your offer needs to be accepted no later than October 15^th.  That’s still over a month away, but reality is that the “good deals” on the market today are nearly all short sales or lender owned foreclosure properties.  Since the average short sale is actually a looooong sale, taking between three and six months to get bank approval, they are out of the question for the first time homebuyer looking to pocket an extra $8k for that glass-top stainless steel dining room set with matching leather chairs. 

That leaves the lender owned properties; exactly 4,398 of them available in the Arizona Regional MLS as of today.  That number is similar to the inventory we were seeing in 2005 during the “boom” days of multiple offers, bidding wars and first time home buyers being left in the proverbial dust of the cash investors.  If you’re a home buying virgin, you’ve obviously never experienced a market like that . . . or any market at all . . . but ask any veteran REALTOR^® and she’ll tell you that today’s market is giving her a serious case of déjà vu.  In fact, the Buyer Specialists on the Arizona Lifestyle Team are writing an average of 10-15 offers for a single client before finally having one accepted.  It’s not uncommon to write offers as high as 20% over the list price of a property in an attempt to defeat the enemies in the great real estate bidding war.

Sure, there are bills in Congress as you read this that, if passed, could extend the tax credit, increase the limits, eliminate the income caps, or even open it up to all home buyers.  It’s highly unlikely, however, that any of this will happen before the November 30^th deadline, if it happens at all.  After all, a tax-credit extension would cost the government billions - a big deterrent when the federal budget deficit already rivals the Grand Canyon, despite the more liberal argument that an extension is critical to economic recovery. 

So what’s a home-buying amateur to do?  If you’re not the gambling type, call your REALTOR^® now and spend the holiday weekend (and every weekend this month and next) house shopping and writing offers.  If you don’t have a REALTOR^®, call the Arizona Lifestyle Team at 1-800-880-7927 ext 7007 and our Buyer Specialists will fill up their gas tanks, pack their coolers with bottled water and fire up their GPSs to get you started on a home buying excursion reminiscent of the time you followed U2 on tour.

On the other hand, if you get your thrills at the Blackjack table, you may want to go double or nothin’ with Congress and hope that the tax credit is not only extended, but increased to $15k . . . ok, almost double.  Just don’t come cryin’ to me on December 1^st if the bills don’t pass and you end up leaving a refundable $8,000 tax credit on your rickety Ikea table that you can’t afford to replace.

As a REALTOR^® specializing in short sale negotiations, some of the most common questions I’m asked by clients considering a short sale include “Will I have to pay back the difference?” and “Can the bank come after me later?”  The difference, also called “deficiency,” is the amount of debt remaining after a property is sold for less than the current balance(s) on the loan(s).  For example, a seller that purchased a home in 2005 with “100% financing” might have two loans for $240,000 and $60,000, totaling $300,000 in debt secured by the property.  In the current market, the property will probably sell via “short sale” for about $125,000 leaving $175,000 in remaining debt or “deficiency.”  Naturally, when considering a short sale, the seller wants to know if they will be required to repay all or a portion of the $175,000 in a lump sum, an unsecured promissory note or, worse, if the bank can sue them for the deficiency in the future.   

One of the greatest tools for negotiating short sales in Arizona is A.R.S. § 33-814, often referred to as the “anti-deficiency statute*.”  This statute* provides an exception to the right of a debtor to recover a deficiency judgment after a trustee sale (foreclosure) for any single family home or duplex on 2.5 acres or less.  What this means, in laymen’s terms, is that if you foreclose on a regular, single family home on a regular sized lot and the bank ends up selling the property for less than you owe, they can’t come after you for the difference.  This is a powerful tool when negotiating a short sale because if your lenders know they can’t sue you for the deficiency later on, why would they bother to foreclose on the property, hire their own REALTOR^®, deal with marketing, maintenance and repair costs, etc., only to end up selling the property for the same amount or less than they are being offered in the short sale?  Deficiency laws vary by State and since Arizona has had one of the most rapidly declining real estate markets in the country for the past four years, it’s fortunate that we are an “anti-deficiency” State. 

The Arizona anti-deficiency statute* recently underwent some significant changes, however.  On July 10th, the Arizona State Senate passed SB 1271, which takes effect on September 30th, 2009, amending the current law to require that a certificate of occupancy must have been issued on the property and that the trustor (also the owner, seller and borrower in most cases) must have “utilized” the property for at least six consecutive months.  Ok, so what does all this mean? 

First off, a certificate of occupancy is a document issued by a local government agency or building department certifying a building's compliance with applicable building codes and other laws, and indicating it to be in a condition suitable for occupancy.  This would apply primarily to new construction homes that may not have been fully completed prior to the trustee sale (foreclosure).  The majority of the clients I work with have properties that were completed in 2006 or earlier and that have already been occupied by the homeowner or a tenant, so the certificate of occupancy will not be an issue in most cases. 

The requirement of the trustor to have “utilized” the property for a minimum of six consecutive months, however, is of major concern to some borrowers who wish to pursue a short sale.  The good news is that borrowers who are currently using the property as their sole or primary residence are probably in the clear.  Borrowers who have used the property in the past as their sole or primary residence, but who have already moved out the property before deciding to pursue a short sale are probably safe as well.  (Although the new law does place the burden of proof on the trustor to demonstrate that the statutory requirements to prohibit a deficiency judgment are met.)  Those who own “investment” properties they have never lived in will, however, will be affected by the recent changes to the law.  I have spoken to several attorneys about this, including John Lohr, an attorney specializing in real estate law with Hymson Goldstein & Pantiliat, P.C.  If “utilized for either a single one-family or a single two-family dwelling  by the trustor” is interpreted to mean that the trustor must have lived in the home for at least six consecutive months, then owners of “investment” properties that they themselves have never occupied, will no longer be protected by the anti-deficiency statute* if the property is sold via trustee sale (foreclosure).

This change is likely to have a dramatic effect on the outcomes of short sale negotiations for borrowers wishing to negotiate a short sale on a property they have never lived in.  In the past, my team and I have been able to successfully negotiate 100% debt forgiveness for sellers who have used the property as their primary residence as well as for investors who have never lived in the property themselves.  With these new changes, however, we suspect that 100% debt forgiveness for non-owner occupied homes will become a thing of the past.

So what’s an investor with negative equity to do?  While the outcomes and consequences have changed, the options are still the same.  The first option is, of course, to keep the property and wait for it to appreciate to what is currently owed.  A home worth $125,000 today will be worth $300,000 in about eighteen years (2027) assuming a rate of 5% annual appreciation.  Option number two is to allow the property to go to trustee sale (foreclosure).  You may be able to file bankruptcy to avoid paying part or all of the deficiency if the lender pursues a deficiency judgment against you.  Loan modification may be an option (read more here), but for many people with investment properties they have never occupied, the best option may still be to hire the AZ Short Sale Team to negotiate a short sale.  While it is unlikely that your lender(s) will forgive all of the remaining debt if you are not protected by the anti-deficiency statute*, in most cases we will be able to negotiate a settlement.  A settlement is an agreement between you and the lender to pay some of the remaining debt owed either in a lump sum, an unsecured promissory note or a combination of the two.  When the lender agrees to settle the debt, they are agreeing NOT to pursue a deficiency judgment so long as you, the borrower, hold up your end of the bargain.  Our track record includes settlement negotiations as low as 5% of the total deficiency for lump sum payments and zero percent interest for unsecured promissory notes.  For a borrower with $175,000 in negative equity, a settlement as low as $8,750 in one lump sum or spread out in payments on an unsecured promissory note with low or zero interest is a lot more appealing that a $175,000 judgment that could result in garnishing of wages and bank accounts or even bankruptcy. 

If you own a home with negative equity, please contact me at Christie@AZLifestyleTeam.com for a free, no obligation consultation to discuss your options according to your individual personal and financial circumstances.  Consultations are 100% confidential and, as always, our goal is to help you determine the path that is in your best interest personally and financially, both short and long-term. 

*You are advised to consult legal counsel regarding the application of the anti-deficiency statute and all other legal matters.

As a REALTOR® specializing in negotiating short sales for homeowners who owe more than their property is worth in today’s market, I am often asked if loan modification is an option.  The answer in short, is YES, albeit with a few caveats.  Negotiating a loan modification is a very similar process to negotiating a short sale and I am happy to report that the AZ Short Sale Team finally has a few success stories to report for clients who found themselves having trouble making their monthly house payments, but who wanted to stay in the home.  (More on this later.) 

In order to successfully negotiate a loan modification, the homeowner must be able to demonstrate that their current payment is greater than 31% of their gross monthly income.  That’s not all, however.  They must also be able to document sufficient income to support a reduced payment.  In other words, you can’t be broke.  If you’re broke, then your best option is probably a short sale.  But, if you have a steady, documentable income and can prove that you can afford to make a reduced payment, then loan modification may be a viable option. 

The most common question that follows “Is loan modification an option?” is “Will they reduce the principal balance?”  The answer, in short, is NO.  In fact, a recent article published on CCNMoney.com reported that the HOPE for Homeowners program which was intended to prevent foreclosures by giving lenders incentives to reduce the principal balance of loans to 90% of the current market value of the property, has saved just ONE family from foreclosure in the five months it has been in effect.  Seriously, just ONE family has benefited from a program expected to help over 400,000  families!  The bottom line is that lenders are far more willing to reduce the interest rate on a loan – to as low as 2% for several of our recent clients – than they are to take the loss on the property unless you’re willing to give up the house (sell via short sale).

While loan modification is the right choice for some, many others feel that a reduced monthly payment simply isn’t enough.  Many who bought during the “boom” years have as much 50% negative equity in their homes today.  For a homeowner who paid $300,000 for a house that is worth just $150,000 today, a smaller payment simply won’t suffice since it will still be nearly fifteen years before the property is worth the original purchase price.*  For households that need to move for employment or growing families, for example, staying in a home for the next fifteen years in order to make up for negative equity just doesn’t make sense.  After all, even the minimal impact that a short sale will have on a borrower’s credit score will be wiped clean long before the home appreciates to its original “boom” value.** 

If you own a home with negative equity, please contact us at LoanHelp@AZLifestyleTeam.com to schedule a free, no-obligation consultation.  We will be happy to discuss your individual situation and help you explore the options available to you. 

*At an annual appreciate rate of 5%
**In most cases

The Obama administration recently unveiled updates to the Making Home Affordable program to make it easier for home owners who owe more than the current market value of their homes to sell those properties at a loss via short sale and have the remaining debt forgiven.  The updates, announced by Treasury Secretary Timothy Geithner, address situations in which borrowers cannot qualify for refinance or loan modification through the program and are at risk of losing their homes.  The administration will now provide additional financial incentives to lenders willing to work with homeowners to negotiate a short sale and avoid the long and costly process of foreclosure. 

The benefits of “short selling” a home versus allowing it to foreclose are three-fold.  The homeowner benefits by minimizing the damage to his or her credit, the lender benefits by avoiding the costs involved in a foreclosure and the community at large benefits by keeping prices stabilized and avoiding yet another empty, neglected property on the block.   

Under the new plan, loan servicers will receive compensation of up to $1,000 per short sale accepted.  As an incentive to avoid foreclosure, borrowers could also be paid up to $1,500 in relocation expenses. In addition, because many homes have second mortgages, the Treasury will pay subordinate lien-holders up to $1,000 to settle the debt and forgive the remaining balance.

“We have heard from REALTORs^® that the extensive delay in the short-sale process has caused many buyers to go elsewhere and has left many would-be sellers with no option but foreclosure,” Charles McMillan, president of the National Association of REALTORs^®, said in a statement. “We are all pleased that the government has stepped in to help homeowners and those wishing to buy a home.”

A recent article on TheDailyBeast.com reported that Kathleen Fuld, wife of the former CEO of the now defunct Lehman Brothers, was seen exiting the Manhattan luxury purveyor Hermès with her goods in a plain white bag instead of a signature orange Hermès shopping bag.  While her husband no longer sits atop one of the largest investment banks in the nation, the couple is obviously far from impoverished.  One might think Mrs. Fuld’s attempt to veil her ongoing lavish spending habits was out of shame or guilt over her husband’s blunders which led the 158-year-old investment bank to its demise, but it’s more likely that ostentatious consumption has simply gone of out style. 

Richard Fuld has been described as the symbol of everything that was wrong with Wall Street.  Is Mrs. Fuld the symbol of everything that was wrong with Main Street?  After all, the culture of conspicuous consumption was practically a national sport until recently.  Who needs a savings account when you’ve got a $20,000 credit limit on your Visa?  Why drive a road-weary Honda when you can lease a shiny new Mercedes?  Equity in your house?  Cash it in and buy a boat!  Remember those days?  You should; they weren’t too long ago. 

As a REALTOR® specializing in negotiating short sales for homeowners with negative equity, I have witnessed the long-term effects of irresponsible spending and borrowing on a more intimate level than most.  I regularly sit at kitchen tables with homeowners who are struggling to make their mortgage payments and answer questions about how a short sale will affect their credit and when they might be able to buy a house again.  The men inevitably declare that “it’s a business decision” and remain emotionally detached while occasionally letting slip a hint of anger.  It’s the women who cry.  The women are the ones who picked out the paint colors and the window treatments and trekked the aisles of home improvement stores for the perfect dining room light fixture.  The women have appreciated the large capacity front-loading washing machine and the stainless steel side-by-side refrigerator and are now wondering if they can take those things with them when they move.  The women are the ones worried about what the neighbors will think and hoping we can sell the house without putting a sign in the yard.  Lately though, I’ve noticed a significant change in the attitudes of those considering a short sale. 

When I first got into the business, the stigma surrounding short sales was much greater than it is today.  A short sale was seen as “almost as bad” as a foreclosure.  Today, however, with property values in some areas at less than 50% of the mortgage balance, many homeowners are looking for ways to “start over.”  Short sales are now viewed as a more responsible way to get out from under the weight of a bad debt without simply walking away and leaving the banks to deal with the mess left behind.  Many people who choose to negotiate a short sale are able to cut their housing expenses by as much as two thirds and end up living in a comparable property in the same neighborhood.  Instead of boasting about that new pair of Kate Spade sunglasses, people are starting to brag about cancelling their cable and selling their ATVs on Craig’s List.  Getting rid of hundreds of thousands of dollars in negative equity and significantly reducing your cost of living has become another thing to brag about.  For many, a short sale is a way to close out one chapter of life and move on to the next. 

One client of mine recently confided that she and her husband plan to start a family soon.  They’ve decided to pursue a short sale in order to decrease their cost of living.  Instead of staying in their current home with mortgage payments totaling $2,500/month, they plan to rent a more modest home for $1,000/month while saving for a down payment on another home in the future.  In doing so, they feel they will be providing a healthier environment for their future children by teaching them the principles of living below your means.  Perhaps there are more important things in life than upgraded cherry cabinets and Prada purses?  This kind of thinking is a far stretch from the “more, more, more” attitudes of the past ten years.  It seems living more conservatively and staying within your means is finally en vogue.  Ironic isn’t it?  Personally, I find it refreshing.

Given the dramatic changes in property values over the past few years, you may be wondering if your property tax rate is fair or accurate.  In Arizona, property taxes are based on the Assessed Value, which, for owner-occupied residential property, is ten percent of the Full Cash Value.  So, if the Full Cash Value of your home is $300,000, you will be charged property tax based on the Assessed Value of $30,000.

Your tax rate will vary depending on where you live.  The rates are determined by cities, schools, water districts, community colleges, bond issues, etc.  The tax rate applied to each property is the sum of the state, county, municipal, school, and special district rates. The average tax rate for homes in Arizona is about 1.3% of the Full Cash Value (or 13% of assessed value).  So, if your home is assessed with a Full Cash Value of $300,000, and your property tax rate was exactly at the average 1.3%, then you'd be paying $3,900 per year in real estate tax on your home.

In the past, the Full Cash Value of most properties in Arizona has been lower than the actual market value.  However, with the steep decline in property values that has taken place in the past three years, this may no longer be the case.  In fact, the National Taxpayers Union estimates that 60 percent of homes are overassessed.  It may be worth your time to do some checking to see if your property-tax assessment is realistic.

You can find the assessed value for a home in Maricopa County on the Maricopa County Assessor web site.  Each year, the Assessor will send an updated assessment on the value of the home, upon which your property tax computation is based.  You probably got this in the mail recently.  The Assessor's Office utilizes a combination of information, including previous sales in the neighborhood, distance from major intersections or areas zoned differently, topography, view, livable square footage, lot size and components, etc.. The valuation is determined by a computer analysis of the information gathered.

Valuing properties is an inexact science to begin with, but when paper records were transferred to computers, many errors were made -- or retained. If there's a mechanical error, the tax assessor may offer a property tax reassessment.  If you don’t catch any blatant

Once you’ve entered your address into the Maricopa County Assessor web site, scroll to the bottom and click on “characteristics.”  This page will show some of the details of your home.  Check each item for mistakes such as the square footage or the number of bathroom fixtures (a “fixture” is a sink, toilet shower).  You may also want to look at the Full Cash Value of similar homes in your neighborhood.  Look for properties similar to yours in terms of age, style and features.  If the assessments on similar properties are significantly lower -- 10% or more – you may want to consider filing an appeal with the County Assessor.

To successfully appeal your property value, you'll need evidence.  Property profiles and web-page printouts are helpful, and photos can be especially useful if you're comparing the condition of your home with others.  You have 60 days after receiving your tax bill to appeal the property tax and present your evidence for an administrative review.  For more information, including forms to help organize your appeal, get the AHA's Homeowner's Property Tax Reduction Kit.  The kit is free with a trial membership on the AHA website.

Of course, if your home is worth considerably less in today’s market that what you currently owe on the property, you may have bigger problems than an overinflated tax bill.  If you’d rather get rid of the house altogether, you should consider a short sale which would allow you to sell the home for less than the current balance(s) owed.  For more information, please visit www.AZShortSaleTeam.com.