Category: Buying Your Home (page 2 of 3)

June 27, 2009

Getting outbid for houses? Relax. Available homes are not in short supply, so there is no reason to overpay

by Greg Swann

Sun City Real Estate Broker

This from my Arizona Republic real estate column (permanent link):

Here’s a situation that’s all too common in the Phoenix real estate market right now:

You make what you think is a good offer on a home, only to find out that you are one of several bidders. The home can be lender-owned, a short sale or just an ordinary owner-owned home. It’s probably priced pretty aggressively to the market, though. That’s why it attracted multiple offers.

Here’s what happens next: The listing agent sends out Multiple Counter Offer forms. The Multiple Counter Offer can specify some ideal offer, perhaps the best one received so far. Or the lister can simply ask buyers to make their best offer. Or the Multiple Counter Offer can specify different terms to each buyer.

How do you respond?

You don’t know what you’re competing against. And even if you have a fair idea of what the best offer might have been before the lister sent out the Multiple Counter Offer, you have no idea what you might have to beat by now.

But, guess what? It gets worse. Because you don’t even know for sure that there are other buyers, or, if there are, if they are willing to respond to the Multiple Counter Offer.

Do you understand? You could be involved in a brutal bidding war — bidding only against yourself!

What are your alternatives?

First, don’t get caught up in the fever of a silent auction. A property is worth what it’s worth in the current market. It does not gain in value just because people are competing for it. Your offer should reflect the market value of the home. If you lose out, go buy another. Houses are not in short supply.

And because houses are not in short supply, ask yourself why you’re in such a fierce competition to begin with. You might not be able to get the property that’s listed at a very low price but sells at a much higher price. But you may be the only bidder on the home that is priced to the market — and will end up selling for the market price.

June 22, 2009

Cashing in on your $8,000 first-time home-buyer tax credit may take some effort in the current Phoenix real estate market

by Greg Swann

Sun City Real Estate Broker

This from my Arizona Republic real estate column (permanent link):

The mini-boom we’ve been seeing in the Phoenix real estate market over the last few months may be abating slightly, but, for now at least, snagging a cheap house can take some effort.

Bargain-priced lender-owned homes are generating multiple offers and are selling, ultimately, at above-list prices. Many lenders are handling their short sales as silent auctions, with every offer being forwarded to the bank for evaluation. Buyers are pitted against each other with multiple-counter-offers.

Many of the buyers of lower-priced homes are investors. Some of them are buying homes to fix and flip, but most are newly-minted landlords in search of tenants.

Most of the rest are first-time home-buyers looking to cash in on the $8,000 federal tax credit. These folks are in a tough spot. Without cash for repairs, they can’t compete for the cheapest of the lender-owned homes. And since the homes they buy must appraise for at least the purchase price, they can’t compete against all-cash buyers.

But here’s the irony in this whole scenario: There is no shortage of housing in the Valley. Right now there are about 33,000 residential listings in the MLS system. That’s down from a high of 55,000, but it’s way up from a low of 11,000 at the peak of the boom.

Moreover, there are many thousands of homes in the foreclosure pipeline that have not hit the market yet. For whatever reason, banks are withholding that inventory — perhaps to put a floor under prices. If so, that floor will likely be a durable one, with the steady drip of lender-owned homes keeping prices at around their current levels for years to come.

But moreover yet again, we are still overbuilt. We simply have more kitchens than cooks. If you have to close before November 30th to get your tax credit, you may not see the humor in our situation. But take heart: Investors can only tolerate so much vacancy before they rethink their spending. Rationality will return to the real estate marketplace.

June 6, 2009

Do you want to save money in the Phoenix real estate market? Stop shopping for bargains and start shopping for value instead.

by Greg Swann

Sun City Real Estate Broker

This from my Arizona Republic real estate column (permanent link):

Are you looking for a bargain in the Phoenix real estate market? Everybody wants to save a buck, but here’s a different way of looking at things: Instead of shopping for a bargain, shop for value.

What’s the difference? A bargain comes about when you get a great price by buying something nobody else wants.

Like this: A grocer puts out a pyramid of apples, selling them at fifty cents each. About half sell at that price, and the grocer marks the others down to twenty-five cents. All but the last six sell, and the grocer accepts your offer of five cents each for the remainder.

That’s a bargain. You got six apples for thirty cents, when they would have cost you three dollars earlier in the day.

The only problem is, your apples are bruised and shopped-over. But that’s why you got them at the bargain price — because no one else wanted them. Tomorrow’s price for fresh, appetizing apples will be the same as today’s price, and you’ll only get the bargain price by bidding low on the shopped-over remainders.

If you’re making a pie, that’s fine. But if you’re having guests over, you’ll pay the higher price.

Apples are not houses, of course. For one thing, every house is unique. If other people are also interested in a home, you cannot expect to pay much less than the asking price.

Even so, when you’re shopping for value in real estate, the purchase price is only one factor in the calculation. What purpose do you have in mind for the property? What are your future financial objectives?

A rental home in a community with no tenants is no bargain no matter how little you pay for it. A residence in a neighborhood where the long term price trend is downward is no bargain no matter how low the purchase price.

Shopping for value means paying as little as you can get away with for a property that actually fulfills your objectives and offers a prospect for future appreciation. Anything less than that is no bargain.

May 16, 2009

The $8,000 first-time home-buyers tax credit gets even juicier

by Greg Swann

Sun City Real Estate Broker

This from my Arizona Republic real estate column (permanent link):

The $8,000 first-time home-buyers tax credit just keeps getting sweeter and sweeter.

First, it’s a true tax credit, not a deduction. In other words, if you would have gotten a $3,000 tax refund next April, with the tax credit you’ll get $11,000.

Even better, a first-time home-buyer is someone who has not owned a home in the past three years.

To get the full $8,000, the purchase price of your home must be at least $80,000. But it turns out that $80,000 is a sweet spot in the Phoenix real estate market right now. In many West Valley communities, $80,000 will buy you a very nice house.

But here’s the icing on the cake: As of this week, The Federal Housing Authority may allow borrowers to use the $8,000 for their down payment.

The lender would offer that money through a second note, and you’ll pay it back when you get your tax refund.

Take a moment to reflect on the implications. That’s right, after nearly five long months of stern fiscal responsibility, we’re right back to doing nothing-down home loans.

The tax credit can be no more than ten percent of the purchase price, but an FHA loan requires only 3.5% down payment. How much house can you buy with $8,000 down? How about $228,500?

The sellers will throw in the closing costs — gleefully — so you could buy a great big Phoenix homestead for no money out-of-pocket.

Make your payments on time and you’ll be living the American Dream — in a home that might have sold for $500,000 in December of 2005.

But don’t dawdle. The $8,000 tax credit ends on November 30th — which means your loan must be completely closed by then. Allowing 45 days for underwriting and another 30 days to find the home of your dreams, you should start your home search no later than mid-September. If you want for the kids to be in their new schools in August, you should probably start looking now.

April 2, 2009

Timing the bottom of the market? For home-buyers, the trade-off may be a lower interest rate now versus a lower purchase price later

by Greg Swann

Sun City Real Estate Broker

I won’t be able to rely on the numbers for another few days, but March will turn out to have been a very busy month. Volume of sales will be up substantially over February, and April promises to be even stronger.

The bad news? Prices were down again in March, and I’ll bet April will also be a down month.

The good news? Mortgage interest rates are at historic lows.

The worse news? The foreclosure pipeline is still very full, and 10,000 more homes are being lined up at the entry point.

And that’s the trade-off confronting owner-occupant home-buyers. We’re looking at two more years of foreclosures, which argues that prices will continue to decline, at least for a while. But it’s hard to imagine interest rates going much lower — or staying this low.

About half of those newly-foreclosed properties will end up as lender-owned resale homes, hitting the market in 60-90 days. FannieMae and FreddieMac had a moratorium on foreclosures in the fourth quarter of 2008, so some of these new foreclosures will reflect that delay. Even so, there are plenty of other troubled mortgages still to hit the pipeline.

I see two issues that matter:

Will new foreclosures come onto the market more quickly or more slowly than they are coming off? Right now, overall inventories are declining, which argues that sometime soon prices will stabilize or even increase.
But do we have enough heads for the bedrooms? We’re overbuilt, and if we don’t have enough people to put into these homes, we could see an echo bust as inventory newly absorbed by investors sits vacant.

We know in the long run we will recover, but we don’t know where the long run is. The question for owner-occupant buyers is the one addressed above: Will you save more by paying a higher purchase price now, at a lower interest rate? Or are you better off waiting for better prices, even if you end up paying a higher interest rate?

Is it possible that the home of your dreams could be selling for $10,000 less three months from now? Yes. Is it also possible that, three months from now, interest rates will be high enough that you won’t be able to qualify for that home, even at the lower price? Sadly, yes.

These are all questions for a lender, so let me know if you want me to put you in touch with one.

March 25, 2009

Phoenix real estate bargain of the day: “I’m looking for a decent home in the Phoenix area that I can buy as a rental for now, but then use later as a getaway home — or maybe even retire to.”

by Greg Swann

Sun City Real Estate Broker

I hear the request in the headline about twice a month. It’s a doable proposition, and it all really depends on price. Spend enough and you can have golf. Spend more and you can have gated golf. Spend way too much and you can have gated golf on the side of a mountain.

This house, in Ryland at Heritage Point in Tolleson, is the bargain-priced expression of that ideal. No gates, no golf, no mountains, but a nice-sized three-bedroom home with a pool in a near-in suburb of Phoenix.

For the record, I don’t love pools for rental homes. If you’re going to have one, then you simply must carry a liability rider while you’re housing tenants.

Beyond that, this house has a lot going for it. Bedroom number two has a closet, but it doubles as a den, a very practical configuration. The landscaping needs attention, but it was decent to begin with, so it should come back fairly easily. The pool was built by Paddock Pools, a reputable company.

We need appliances, along with flooring and paint, but the home is in pretty good shape overall.

The home is listed at $87,900, which is pretty aggressive. I might start at $80,000 and see who salutes. With $5,000 to whip it into shape, it could be rent-ready (or move-in-ready) for $85,000. It should be able to command $950 a month in rent, maybe even $1,000, very comfortably cash-flow positive.

And then, someday, you can lay on your back on your air mattress in your own backyard pool, watching the silent progress of the jets taking flight from Skyharbor Airport. There’s a beer or a margarita somewhere in this scene, but you’ll have to paddle over to the cool-deck to find it.

In the mean time, email me or phone me at 602-740-7531 and let’s go take a closer look at this property…

March 24, 2009

Real estate bargain of the day: The Lavendar floorplan at Coldwater Springs could be yours for $90,000…

by Greg Swann

Sun City Real Estate Broker

I’ll make it back to Coldwater Springs sometime soon, but, for now, this house is making me crazy. I’ve been following it for six months, and, despite a very sweet pricing history, it just won’t move.

What’s this property’s Achilles’ Heel? It’s missing its dishwasher, and I think the lack of a $600 item is sending buyers elsewhere.

If you can make a mental leap, you’re in for a nice bargain. The home faces south, and you’re just steps away from the Coldwater Springs Golf Course. There’s ample shopping nearby, and the public school is right in the middle of the subdivision. Kids can walk or ride their bikes to school without ever crossing a busy street.

As a starting bid, I like this home at $85,000. It has competition at $88,5000, but the recent low sale in the Lavendar floorplan was $105,000. The all time high for a Lavendar without a pool was $267,107.

You’re looking at around $5,000 after closing to whip it into shape — dishwasher, range, refrigerator, carpet, paint, landscaping and touch-ups.

How will it rent? It should go for $950 a month, comfortably, throwing off around $7,200 a year in before-tax cash-flow.

This is a smokin’ deal in an Avondale neighborhood that should be a pace-setter, once the real estate market starts to recover.

If you want to give it a closer look, email me or phone me at 602-740-7531.

Not home yet? Not to worry. We’ll talk about another great deal tomorrow.

March 23, 2009

Phoenix real estate bargain of the day: Sweet suburban homes with a community pool. Schools, shopping and jobs nearby, with easy access to Phoenix and the West Valley — all for $60,000 — or less…

by Greg Swann

Sun City Real Estate Broker

These houses are making me crazy. The Phoenix real estate market is awash in incredible bargains. I’m going to start writing about them until they’re sold.

Here’s the way it is: Decent-quality homes are for sale for fire-sale prices. Interest rates are at all time lows. Whether you’re buying a home for your family or a rental home — perhaps to produce income now and serve as a retirement home later — opportunities abound.

Today’s bargain is actually four bargains, four homes in the same floor plan in the Ryland at Heritage Point subdivision in Tolleson, Arizona.

If you follow that link, you’ll find photos on eleven houses, but today we’re just going to talk about the four that are selling for the lowest prices.

The photos I’m showing you are “warts and all” pictures. These are lender-owned homes, and all of them will need some work before they are move-in- or rent-ready. But, as you’ll see, most of them won’t need much work, and we can help arrange for contractors and handymen to get these minor jobs done — quickly and economically.

So let’s take a look at our four houses. Tolleson is a near-in suburb of Phoenix, and Ryland at Heritage Point is the jewel in its crown. There is a community pool and ample green belts, some with playgrounds. There is great shopping nearby, and freeway access could not be easier. You’re in the heart of the West Valley warehouse zone, so there are lots of good-paying jobs in the immediate area. In short, this is a nice place to live and a profitable place to own rental homes.

8330 West Hughes Drive Tolleson AZ 85353

This house is in decent shape overall. Alas, the air conditioner compressor will probably need to be replaced. The most recent sale in these units is $55,000, so $50,000 would be a fair offer on this home. You should figure your net entry cost at around $60,000, although it could be less.

2612 South 84th Glen Tolleson AZ 85353

This house is better than it looks right now. The lister promises to do something about the front-yard landscaping, and the rest of the house is not in awful shape. The carpet needs to go, and the house faces east — which means the back of the house will get very hot on summer afternoons. I like it at $52,000 to start.

2620 South 84th Glen Tolleson AZ 85353

Not awful, but it faces east, and there is a lot of bad decorating to be undone. I like it at $50,000 as a starting offer.

8433 West Preston Lane Tolleson AZ 85353

I see this one as a reject, but you might see it as a challenge — and a bargain. The kitchen has been gutted, down to the walls and plumbing. The water heater is gone and the AC compressor is damaged. It’s going to take $15,000 – $20,000 to whip this house into shape, so I think $35,000 is a fair place to start negotiations.

Why not lower on all these? Because the list prices on these homes are already so low that you will have competition in bidding on them. But each one can be made turn-key livable for about $60,000, gross, and this exact floorplan in this subdivision has sold as high as $237,000 in the past. They’ll rent for around $850 a month, so they’ll be cash-flow positive from the first tenant.

These are smokin’ deals. If you want to jump, email me or phone me at 602-740-7531 and we’ll get cracking.

Are these homes not for you? Fear not. I have thousands more available. We’ll talk about another great deal tomorrow.

February 27, 2009

Are you thinking of buying a home in metropolitan Phoenix? Here’s some good news: FHA loan limits are back up to $346,250

by Greg Swann

Sun City Real Estate Broker

Until this week, if you were shopping for a home in greater Phoenix, if the price got too near $300,000 you were stuck going for a convention loan — 5% or even 10% down, with monthly private mortgage insurance payments.

But as of this week, the limit for FHA loans in metropolitan Phoenix has been bumped back up to $346,250. With 3.5% down, you’re shopping in the $350,000 to $375,000 range, with a purchase price coming in at $358,000 or lower.

And you can buy a whole lot of very wonderful house for $358,000 right now. I just looked. There are 417 homes in that price range within 20 miles of Downtown Phoenix — not counting short sales and lender-owned homes.

For buyers who have been sitting on the sidelines, great homes at all prices ranges are available in abundance. But if you can find a home you can love beneath that FHA limit, you can get a ton of house for just 3.5% down.

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November 23, 2008

The bottom of the Phoenix real estate market may be in sight — but, alas, the end is not near

by Greg Swann

Sun City Real Estate Broker

This is from my Arizona Republic column (permanent link):

When will the Phoenix real estate market finally hit bottom?

Believe it or not, I can answer that question with a high degree of precision: When the number of homes being added to the available inventory each month is generally lower than the number of homes sold each month.

But that’s a sleight of hand, isn’t it? I can’t say which month on the calendar will be the market’s nadir, I can only tell you what kind of market activity to watch for.

So here’s one way of looking at things. A newer suburban tract home in the West Valley is selling for $100 a square foot, on average. Practically speaking, this makes new home building unprofitable. Very few new homes will be built, so that source of new inventory is cut off for now.

Meanwhile, various loan workout programs are depleting the foreclosure pipeline. Where before a house might be offered as a short sale and then as a lender-owned home, now there will be an interregnum for the workout. What had been a gusher of lender-owed homes may slow down to a trickle, at least for the next few years.

Meanwhile, the low prices of currently available lender-owned homes are providing incentives for monied investors to come to Phoenix to snap up bargains. The nationwide economic slowdown might put the brakes on our normal in-migration patterns, but if people do move here, they’re going to be soaking up inventory as well.

So we should see some slowing in newly-listed homes, and we have upticks in demand. Are these enough to stop the general decline in home values in the Phoenix market? Ask me in three months.

But even if they are, we’re very far from being out of trouble. The loan workouts, particularly, may well keep home prices from plummeting. But because they will stretch out what in most cases will be an unavoidable foreclosure process, they will probably keep home prices low for years to come.

Buy and hold? No problem. Profit on resale? Don’t bet on it, not for a while.

October 25, 2008

Foreclosure homes are sold “as-is” — but most need only minor restoration to bring them back to fully-livable condition

by Greg Swann

Sun City Real Estate Broker

This is my column for this week from the Arizona Republic (permanent link).

Foreclosure homes are sold “as-is” — but most need only minor restoration to bring them back to fully-livable condition

If we were to have a contest for the Valley’s most-gutted home, judging might take a while.

A significant number of homes for sale in the Phoenix area, especially at the low end of the price spectrum, are in the foreclosure process. Not all of these homes are in rough shape, but a lot of them are. At a minimum, buyers of short-sale or lender-owned homes should anticipate painting the walls and replacing the carpets.

But virtually all foreclosure homes will be sold “as-is.” This means, first, that any defects discovered in the inspection process will be the buyer’s responsibility to repair after close of escrow. But the “as-is” addendum also often implies that there may be serious deferred-maintenance issues.

Still worse, many lender-owned homes will have been looted, either by the former owners on their way out or by burglars. Missing ranges, microwave ovens and dishwashers are common. Air-conditioner compressors and hot-water heaters are also absent from many homes. It is not uncommon to see that all of the ceiling fans or all of the knobs on drawers and cabinets have been removed.

My pick for the most-gutted Valley home? The entire kitchen was gone — even the kitchen sink — and the air-handler had been removed from the attic.

I would not want to refurbish that last home, since there is no telling what else has been taken. But for most lender-owned properties, the cost of bringing the home back to livable condition is fairly low.

A new set of kitchen appliances is maybe $2,500. A brand new air-conditioner compressor is around $4,000. A decent water heater is perhaps $1,200 installed. Paint, carpet and tile in the high-traffic areas should run $5,000 for a typical suburban home, less if you do the work yourself.

There definitely are homes to avoid in this market, but there are many, many others that are selling for very low prices. These properties need only very minor restoration efforts to bring them back to fully-livable condition.

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October 18, 2008

This just might be the optimal time to buy a home in Phoenix

by Greg Swann

Sun City Real Estate Broker

This is my column for this week from the Arizona Republic (permanent link).

This just might be the optimal time to buy a home in Phoenix

Who should be buying residential real estate in Phoenix right now?

If you have been planning to buy a home sometime soon, and if you know for certain that you won’t need to sell it for at least five years, this just might be your magic moment.

Interest rates are still deliciously low, but both current events and long term trends suggest they’re headed higher. You’ll probably have to sell your current home for less than you wanted to, but you’ll be buying your next home at a bargain-basement price.

Sadly, you may not have enough equity in your home to move up. But if you do, there are some amazing homes out there selling for unheard-of prices. Houses that sold for $375,000 in 2005 are going for $175,000 three years later.

If you do have substantial equity in your home, even at today’s prices, moving up now may make a lot of sense. The rules for the capital gains exclusion on primary homes change on January 1st. If you’ve been in your home for more than the last 24 months but fewer than the last 60 months, moving before the end of the year could save you a significant amount of money on your taxes.

It makes sense to me for college students and their parents to snap up condominiums and starter-homes while prices are so low. After the start of the year, if the student holds title, it will take five years to realize the full benefit of the capital gains exclusion — approximately the length of a college career.

First-time home-buyers are taking advantage of this market, as well, with low-down-payment or even nothing-down government-sponsored loans.

Who else should be buying? Investors, of course, but the smart ones have already figured that out. For now, it’s very easy to acquire a premium home in a commuter-friendly suburb that will be cash-flow positive from the first tenant. Investor loans can be hard to obtain, but prices are so low that many investors are simply paying cash.

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September 6, 2008

August was a great month for real estate sales, but when 40% of buyers are pushed off the playing field, home prices could plummet

by Greg Swann

Sun City Real Estate Broker

This is my column for this week from the Arizona Republic (permanent link).

August was a great month for real estate sales, but when 40% of buyers are pushed off the playing field, home prices could plummet

We won’t have reliable numbers for a few days,* but preliminary results leave no doubt that August was a huge month for real estate sales in the Valley of the Sun. Not for prices, alas, which continued to slide by around 1.5% last month. But, of the bread-and-butter suburban tract homes we track, around 200 will have sold, a two-year high.

September promises to be a banner month also, with nearly 280 homes currently under contract. Not all of those homes will make it through the escrow process, but most of them will.

What accounts for all this activity? The single greatest factor is seller-paid down-payment assistance programs like AmeriDream and Nehemiah. An FHA loan requires a 3% down-payment, and these grant programs permit the seller to fund the grant, along with up to 3% more for closing costs. The upshot is that buyers can take possession of the home for “nothing down.”

In recent months, down-payment assistance programs have accounted for as much as 40% of sales of resale homes, and as much as 90% of new-build sales.

Here’s the catch: Under the mortgage relief act recently signed into law, seller-paid down-payment assistance will be forbidden. The restriction takes effect on October 1st, but most lenders have already closed the window on new AmeriDream and Nehemiah loans.

It’s possible these programs will be reinstated by future legislation, but, even if they are not, it’s not the end of the world. It’s no great challenge to find a decent starter home for $100,000. And if buyers cannot manage to save up $3,000 for a down-payment ($3,500 after October 1st), acquiring a huge new debt may not be the best solution to their financial problems.

But the short-run prognosis seems pretty obvious: When 40% of resale buyers are forced onto the sidelines, the downward pressure on prices should accelerate.

The bottom line: If you’re prepared to buy a house in the Phoenix area, either as your residence or as an investment, prices could be very attractive.

*Final results for August 2008 are reported in the BloodhoundRealty.com Market Basket of Homes.

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August 16, 2008

Amazing bargains abound in the Phoenix-area real estate market — and here’s a web site full of photos to prove it

by Greg Swann

Sun City Real Estate Broker

I wrote last week about the incredible bargains to be had in the Phoenix resale real estate market. Dumpy homes in bad neighborhoods are very, very cheap, but there are so many Short Sales and Lender-Owned homes on the market right now that you can buy choice homes in choice neighborhoods for amazingly low prices.

If the run-up in prices in 2005 was caused by “irrational exuberance,” then our current market is driven by “irrational despondency.” The question for people who are not irrational is this one: How low can these prices go?

I’ve been shopping for a getaway-home for an out-of-state buyer. I’ve built a web site to show off some of the homes I’ve been previewing. The winner so far? A newer three bedroom, two bath home with a pool — on a golf course — with custom tile mosaics — for $110,000.

It’s a sad thing for the folks who lost these homes — and their lenders are no doubt shedding salty tears, too. But if you have the means to buy a home in the Metropolitan Phoenix area right now, you can get incredible values for your money.

You can visit the web site or just click on one of these links to see these homes:

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July 5, 2008

Musical chairs: You can buy a home on leased land for a bargain price, but you must be prepared to sell before the music stops

by Greg Swann

Sun City Real Estate Broker

This is my column for this week from the Arizona Republic (permanent link).

Musical chairs: You can buy a home on leased land for a bargain price, but you must be prepared to sell before the music stops

We’re preparing to list a condominium that sits on leased land. Land leases aren’t common in the Phoenix area, but they do exist.

The most common way to own real property in the Valley is in fee simple: You own the land and all the structures on it, plus any mineral, water and air rights that haven’t been alienated by legislation or previous sale.

A very distant second way of owning property is the condominium plat: You own the airspace described by your interior walls, and you and all of your neighbors own the land and structures in common. Most often you will also own the air conditioner, and possibly also the roof. These are expensive to replace, so crafty developers and their HOAs socialize the risk to you.

We have a few co-ops in the Phoenix area, but very few. In a cooperative, you and all of your neighbors own the land and the structures in common, and you have a right to occupy your living space.

In a land lease, the structures can be owned in any one of these three ways — by individuals, by a condominium HOA or by a cooperative corporation. The important difference is that the land is owned by a landlord, and the landlord will be taking that land back someday.

What happens to the structures? They revert to the landlord’s ownership, and the former owners of those structures are left owning nothing.

In essence, it’s a game of musical chairs. The structures on the leasehold pass from owner to owner, but, when the music stops, no one then on that land has a place to sit. This tends to depress property values on leased land.

But land leases are written for very long terms, and a lot can happen in that time. If the landlord gets a huge offer for the land, the people who own the structures could get bought out early at a huge premium.

In the mean time, in exchange for taking the downstream risk of a depressed resale price, buyers can purchase a home for a bargain price.

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