A Lesson for Banks–From Tucson


Tuscon Realtor  Dave Smith should have been hired by the banks five years ago. Had they heeded his advice about dumping foreclosures onto the market in “as-is” condition, they might be in much healthier financial condition today.

This week we are so honored to have Tucson Realtor Dave Smith visit our San Diego real estate site and share his treasured perspective:

Is the Grass Always Greener?

Well,  in this case it is.  The grass is always greener on the other side of the Rockies.  I know I’m supposed to be writing an Ah Ha! insight into the Tucson Real Estate market in 2011.But honestly,  It’s pretty boring.

I’m following the market and provide a snippet update on the Closed transactions in the Tucson MLS system a few times a week for my regular readers.  Things aren’t as bad as they were a couple of years ago.  There are a lot of differences between then and now.  I’ll focus on two differences that stand out in 2011.

REO’s Stopped Selling “As Is”

The largest number of homes sold in Tucson each month are REO homes.  Yep, the banks own them. In 2009 those transactions accounted for about 17% of total sales.  Now they are about 50% or more each month.   They made a lot of rookie mistakes in the beginning. (They are still making them, just not as many or as fast)  One of the biggest mistakes they made was selling off their foreclosures “As Is”.  You see, they didn’t really think this through.  Then one day a light bulb went on and they suddenly realized what a big mistake “As Is” was.

Everyone else in a community knew the first time one sold.  They knew that when it comes to property appraisals there’s no distinction between a foreclosed “trashed” home that sells and their home that has been well maintained with TLC.  Unlike automobiles where there are “flood cars” and there are regular used cars.  No one buying or selling cars would consider the two together; but not so in real estate.  They are all lumped into one big pot for the purpose of appraisal.

Here’s the lights coming on experience.  The bank now owns 3 homes in a community.  Last year they sold 4 homes in that community “As Is”.  They were trashed, and the bank just wanted to “unload” them and get them off the books.  This year the 3 they have are in good condition.  And they have learned to come in and have those homes inspected, appliances replaced and in most cases have the homes in good working order.  But they can’t really get what they would hope for the homes.  Why?  because they won’t appraise.  Those 3 homes they sold “As Is” last year, well under market are now skewing the values in the community.  Ah, Ha!

Last year they were hurting the resale market in that community for home owners.  This year they have ruined it for “THEMSELVES.”  And no one thinks the foreclosures are going to stop any time soon.  Slow down, sure, but stop . . . we are a ways from there.  Fixing up homes, getting them ready for market, keeping the utilities on for inspection, all the things a typical home owner does to entice the highest price for their home is now what the Banks are finally beginning to do.  How long will it take . . .  stay tuned.

Cash, Cash, Cash

Even with near record low interest rates, people feel betrayed by banks.  Why?  BECAUSE THEY WERE BETRAYED BY BANKS!

They don’t want a mortgage.  They want it own the home and be done with it.  No monthly mortgage payments.  No wondering if they will have some bank “Foreclose” on them even if they are making their monthly payments on time and have never missed a payment.  Yes, that is happening, NOW!

No need to risk some paper pusher at a bank putting the wrong address on a piece of paper or a file and suddenly one day the sheriff is on your door step and you are being evicted.  Cash, no monthly payments.  Cash, no Snidely Whiplash to fear.  Cash, cash, cash.

No future interest revenue for the bank on these 439 homes.  The buyers bought them and that’s exactly what they end up paying for them.

Those are two big difference in our real estate market in Tucson.

So, let’s talk about grass (the kind you mow).  I’ve been a year getting my back yard ready for “grass”.  When I moved to Tucson two things I happily gave away.  My snow shovel and my lawn mower.  Now 11 years later, my strong desire to see green grass has out weighed my dislike for mowing.  I’ll gladly water, fertilize and remove weeds.  The new bermuda grass seed I spread two weeks ago is now up and growing.  My backyard is going from brown to green.  From dead hard dirt to a living growing sponge which holds water for the aquifer instead of running it off the barren ground.

It took a lot of prep work.  A lot of planning, sweat, preparation and hard work, but finally, I’m seeing results.  I’m seeing a green future.  It’s been awhile coming, and the grass isn’t the same blue grass we had back in Iowa.  But it is growing in the environment we have.  There are lessons to be learned about real estate today from growing grass.  I’ll leave you to figure out what those are.  Thanks for reading.  Have a great week.  And if you are out mowing, and smelling that great scent of cut grass, remember there’s a guy in Tucson that can’t wait to smell it himself.


  1. Gena Riede said at May 31st, 2011 at 3:56 pm Fabulous! Dave does such a great job and I enjoy reading him. Such a sense of humor and what can I say…right on with the banks. It’s come back to bite them in the butt. Amazing how they did not see this coming!!
  2. Kristal Kraft said at May 31st, 2011 at 4:23 pm Great observations by Dave regarding the “as is” sale of reo’s. Sadly banks didn’t learn from our real estate cycle of the 1980′s. Of course the downturn then was much different that it is now, but the end result is the same. Values won’t go up until we sell off the inventory. We aren’t going to sell it off until it becomes so attractive to investors and regular folks that they buy it.