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Tuesday, October 30, 2007

Whether to move or commute?


In yesterday’s Wall Street Journal Real Estate Section they fielded a question from a man who lives in Clarkston, Michigan and has an opportunity to take a better job out of state. He wrote to ask whether it was better to take a company paid buy-out that would assure him at least no loss or wait by leaving his family behind and doing the weekly commute routine. Apparently his wife loves the Clarkston house and doesn’t really want to move. He questioned whether it made sense to try to wait out the current down real estate market.

Here is a portion of the WSJ answer:

Financially, your question is a no-brainer: Take your company's offer to buy your house and run! And not just for the obvious reason, which is that you'll avoid having to maintain two households. According to the National Association of Realtors, existing U.S. home prices fell 1.5% in the second quarter over the same period a year before; in the Detroit metro area, which includes Clarkston, prices fell 7.1%. Another troubling sign: Foreclosures in the metro area jumped 50% in the first half of this year over the year before. Part of this is a result of the cyclical decline in the real-estate market that's affecting the rest of the nation, but part is not. The flights of traditional heavy Rust Belt industries to other nations, and the troubling decline of the American automobile industry, are long-standing problems that directly affect real-estate prices. I see no immediate end to them. Home prices ultimately hinge on job growth. According to the latest report of the Bureau of Labor Statistics, Michigan was dead last among the 50 states and the District of Columbia, with a job growth rate over the last 12 months of 1.5%. The national rate is 4.5%.

I suppose that there’s no real news there, although I wasn’t aware that we’re “dead last” in the job growth rate. Michigan even ranked after the District of Columbia and I'd guess that, if they had looked at Puerto Rico and the other 7 U.S. Territories and Protectorates, Michigan would likely have ranked 59th instead of 51st. By the way, can you name those other 7 territories and protectorates - answer below.

The article went on to discuss the emotional toll that long-distance commuting can exact on a family and generally came to the conclusion that the author of the question should move on with life. I can certainly attest to the stress of having to leave the family behind to move to a new job. When I first came to Michigan, it was to take a new job and I had to leave my family behind in Indiana while we tried to sell our house down there. I got lots of company support for temporary living in the Detroit area, but I ended up driving back home every weekend until we finally sold the place there some three months later. It was not fun.

In Indiana, we had a neighbor who was a traveling salesman for a line of hardware. Each Monday he would set out from home and wouldn’t be back until that Friday afternoon. Somehow, that scenario plays completely different that the one above. I suppose it’s because the family never left their home and daddy always came home to the same home every week. It certainly takes an understanding wife to put up with having to raise the family essentially by herself; but, in that case it worked for them.

I’ve also known a family in Milford where the husband took a job in another state, that was about a 2 hour (one-way) commute and ended up driving back and forth to work everyday for almost a year, before he finally got so tired of it that they moved down thee and left their house empty and on the market up here. I can only imagine the stress of facing that commute five days a week and still having to get home and cut the grass or make repairs or whatever. And then there's missing all of the things that go on during the week, like little league games or soccer games. That's got to be tough.

So the answer, almost no matter what kind of deal you have to make on the house here, is to get it over with an move on with life. It’s not worth the hassle and the stress to try to wait out the current market here. I think you’ll find that whatever the loss you take here, you’ll make up some (maybe all) of it on the other end. Most of the country has caught up with Michigan in the real estate slump, so prices are likely to be depressed where you’re headed. Then there's the savings of not having to maintain two places to live. Most companies wouldn't sustain temporary living allowances indefinitely. So, my advice is to price your current home aggressively, get it sold and get on with it. Call me, I can help.

The U.S. territories and Protectorates are American Samoa, Federated States of Micronesia, Guam, Marshall Islands, Northern Mariana Islands, Puerto Rico, Palau and the U S Virgin Islands.

Monday, October 29, 2007

The 5 Dumbest Renovation Fads

I read an interesting article on the CNNMoney.com site entitled The 5 Dumbest Renovation Fads, written by Duo Dickerson, a Money Magazine contributing writer. Dickerson names what he believes to be the 5 things that people spend money on in renovations that likely won’t pay off and which are mainly driven by the mistaken belief that they are trendy updates that people will like. In most cases, as he pointed out, they just add cost and don’t pay back. As I was reading the article, I also realized that these are five mistakes that builders made in our area for some time (some are still doing a few of these on new-builds), likely also for “it’s the trend” reasons. So, if you’re considering remodeling your house anytime soon, take into account the 5 things listed below. They may not be the value adders that you think they are.

The mistakes, as titled by Dickerson, are – the great room craze, the kitchen stadium, the garage that ate your house, porches in the wrong places and built-in lighting. There’s probably something on that list to offend everyone who reads this blog; so, let’s dive in and look at each one.

I have to agree with Dickerson’s point that the 1980’s fad of great rooms – huge open (often two stories high) rooms that combined the kitchen dining room and living rooms and often featuring walls of windows two stories high – invariably ended up creating loud, overly bright and hard to heat or cool spaces that remind one of a hotel lobby; especially if the marble that is often used in the foyer is extended into other rooms. Homes that have these rooms usually have somewhere else – a family room or den - where the occupants go to watch TV, play or to just relax. The great rooms of these houses often end up being sterile, static displays of furniture and art that is very seldom actually used. Better to have a nicely laid out series of more traditional rooms that flow, with larger doorways or perhaps French doors to allow for them to be closed off.

The stadium kitchen is more a mistake of layout than anything. People do want bigger kitchens these days. Tiny, galley style kitchens do make entertaining difficult; however, spreading the kitchen over too large an area, especially if appliances and storage areas become widely disconnected can make for a very inefficient kitchen. Better to have a kitchen design expert layout the kitchen design from a functional standpoint and then perhaps layer entertainment areas around the outside of the primary cooking area. Hearth rooms in the kitchen are another fad that seem to be less than practical and just add cost.

The garage that ate your house fad is all about those huge 3-4 car garages that seem to dominate the whole front of the house. In some modern subs the garage is just about all that you see from the street, with the bulk of the house hidden behind. Remodeling your home to add a monster garage would be a mistake, especially if you’re thinking of adding it to a vintage house. You can easily end up with a house and garage combo that is all out of proportion. Better to build a second, detached garage, perhaps in the back yard or add to the rear of the current garage and create a side entrance for that addition.

Porches in the wrong places was Dickerson’s warning about putting porches in front of rooms that should have light and a view, like the living room, thus blocking both the light and the view. One should also consider on which side a porch should go, if you plan to actually use it. It’s hard to idle away the evening on the porch, watching the sunset, if you’ve placed the porch on the northeast side of the house. Spend some time thinking about how you plan to use the porch before building. Also plan for the porch by thinking of it as a destination, rather than just a space to pass through on your way into the house. As I reported in my October 2 post, there is quite a trend towards “outdoor rooms” right now and you should think of your porch as another of those rooms. If your patio is your outdoor kitchen/dining room, then your porch can be your outdoor living room.

Finally there is built-in lighting, aka recessed lighting. Dickenson points out that excessive recessed lighting, which has recently become the norm, makes a home look more like a meeting room at a convention center. I agree. The other thing that happens when recessed lighting is put in as a home renovation project is that multiple light switches pop up all over the rooms each controlling what light circuits the home remodeler could get to on that side of the room. I’ve been in houses where there are 3-4 switches on different walls in a remodeled room, just to turn on the various recessed lights. It’s annoying. Dickenson recommends a mix of some recessed, some wall sconces, and some traditional lamps or floor lamps, to give a more balanced lighting effect. When I first moved to my historic home, I discovered what it’s like to live in a house where there are no lights that you can turn on by flicking a switch when you walk into a room. I had to go out and buy 20 lamps and floor lamps, just to light the place; but, I ended up with an ambiance that fit the house.

So, there’s the list, according to Money Magazine’s Dou Dickerson, of at least 5 renovation ideas that may have been passing fads and may not end up adding the value to your home that you had hoped to add. I continue to be an advocate of doing some remodeling or renovation to your home each year, as a way to keep it updated; however, I can understand Dickerson’s point about also trying to avoid fads that may not have good paybacks. As always, good taste and sticking to classic design and decorating principles will lead to the best results and the biggest paybacks.

Saturday, October 27, 2007

Don't scare off your buyers...


This time of year is one of two major holiday decorating opportunities, along with Christmas. For whatever reason, Halloween has grown into a major decorating holiday, with some people going all out to create large, garish and ghoulish displays on their front yards. Christmas has become the same way. There is a can-you-top-this mentality in some neighborhoods that lead to outlandish displays. In fact there is at least one story every year and Halloween or Christmas of someone going so far overboard that they are cited and fined by the local government. That happened in our area this Halloween when one zealous decorator let his display spill out on the city right-of-way between the sidewalk and the street. He was fined and ordered to remove the offending items from the right-of-way.

Now imagine if you house is for sale and a prospective buyer drive by or drive up with an agent and sees something like our picture above. Is this a place that they really want to stop at and visit? Not likely. It gets even worst if the decorating is carried over to the inside of the house. Imagine trying to walk through and evaluate a house that is full of giant spider webs, severed heads and skeletons that aren’t even in the closet. DON'T DO IT! It's really not all that cute to potential buyers. If you’re trying to sell your house right now, you’ve got to sacrifice this year’s haunted-house motif and try to keep the place looking presentable and respectable. Try a fall harvest motif, if you are compelled to decorate. A few nice pumpkins, some cornstalks and perhaps a few other traditional fall decorations will add a touch of class and not overwhelm the visitors.

The same will be true with Christmas decorations. Some people will begin putting out their Christmas lawn displays as soon as they take down the Halloween stuff. If your house is on the market, leave the plastic Santa's and the reindeer with nodding heads in storage this year. If you must put a few lights up outside, be discrete and think “less is more” when planning your display; and whatever you do, avoid the temptation to put those huge blow-up figures of the Grinch or Santa on your lawn. Inside a few nice wreaths and some seasonal swags, maybe combined with some discrete electric candles in the windows. That looks classic. Decorating the mantle and putting up a traditional tree is OK, too.

Remember also, that a significant part of the population that could visit your house during this season may not be of the same religion as you and may come from cultures that do not celebrate the same holidays as you. Forcing them to run a gauntlet of Christmas religious figures or symbols may put them ill at ease. You’re trying to sell a house not evangelizing potential buyers.

So decorate with discretion for Halloween and Christmas, while your house is on the market. If you need a guide, go buy a Martha Stewart book and she what she recommends. Somehow I doubt that Martha’s yard looks like the one above either.

Friday, October 26, 2007

Been there, done that...


Existing home sales sank 8 percent last month, to the lowest pace on record, according to the latest reading on the state of the battered real estate market released Wednesday. Sales of existing homes slowed to an annual pace of 5.04 million in September, compared with a revised 5.48 million sales pace in August, the National Association of Realtors said.

Last month's numbers mark the slowest annual pace of sales since the current measure - which includes multiple-family dwellings - began in 1999. It is also the steepest one-month and annual drops on record. Economists had forecast that sales would slow to a 5.25 million pace.

"Mortgage problems were peaking back in August when many of the September closings were being negotiated, and that slowed sales notably in higher priced areas that rely more on jumbo loans," said Lawrence Yun, NAR senior economist, in a statement. Jumbo loans apply to mortgages for $417,000 or more. Many lenders pulled out in August due to turmoil in the credit markets. The slump pushed the glut of existing homes on the market to 4.4 million, which represents a 10.5 month supply - the biggest in 12 years. "Sales were dampened by the mortgage cancellations," Yun said.

In addition, the median price of existing homes fell to $211,700 in September, down 4.2 percent from a year earlier. The lack of high-priced sales caused the second largest year-over-year median price decline on record. NAR reported that September existing-home sales suffered more in the West than any other region, dropping 9.9 percent from August and 27.8 percent from last year.

The median price in the West was $308,900, or 8.8 percent below a year ago. In the Northeast, existing-home sales were off 10 percent from August and trailed last September by 13.5 percent. The median price in the Northeast was $261,700, up 0.5 percent from a year ago. Sales in the South slowed by 6 percent from August and were 18.7 percent lower than they were in September 2006. The median existing-home price in the South was $174,400, down 5.5 percent from last year. The Midwest showed a 7 percent drop from August and a 16.2 percent decline from a year ago. The median price in the Midwest of $170,700 was up 1.4 percent from September 2006.

I’m getting a bit numbed to all of these reports, as are my sellers. Maybe it’s because we’ve been in this slump for so much longer than the rest of the country. The Midwest can be “up” a bit on the median price against last year, because we’re at least a year ahead of the curve on this slump. If there is another “upside” to where we’re at in this slump, it’s that our sellers have had enough time in this situation to become realistic about what they can likely get for their homes and new listing prices are starting to reflect that a bit.

It’s just a waste of everyone’s time to list an overpriced house. Even some agents have started turning down listings if the owners won’t let then set realistic prices. Of course there are always some agents who will take any listing at any price, just to get the signage exposure. As a Realtor in this market, it is often best to wait and be the second or third Realtor on a listing, by which time maybe the seller is worn down enough to become realistic on price. Remember that the third leg of the 3-P’s of real estate was price (see post of August 14), with patience and persistence providing the other two legs. All are required in this market.

Thursday, October 25, 2007

You've got ghosts...


I saw an article about ghosts in houses yesterday by Keith Pandolfi of This Old House online. At first glance I thought it might be a tongue-in-cheek thing; but it turned out that he was serious, or at least trying to be. The article started out innocently enough by trying to explain away most of the creaks and groans and other things that go bump in the night in houses, especially old houses. Having fielded panic calls from new homeowners about strange noises in their new home, I could empathize with him in his efforts to explain away most of these “strange occurrences.”

He lost me in the opening paragraph of the second section however, when he wrote this –
“Once you’ve ruled out natural causes, you have a choice of what to do next. You can either learn to live with the novelty of a ghost in your house, or get in touch with a legitimate ghost researcher to help you understand what’s going on." WHOA! I had no idea that there were both legitimate and illegitimate ghost researchers running around out thee. According to Pandolfi, “there are hundreds of them out there with a varying degree of credibility.” If there are hundreds out, there they all have a credibility problem as far as I’m concerned.

As is common these days, Pandolfi advises the would be haunted homeowner to check out potential ghost busters on the Web. He states, “Avoid ghost hunters who dabble in magic, the occult or offer ‘magical cleansing’ of homes.” I’d almost go the opposite way. If you’re already believing in ghosts, why not go all the way and believe that Harry Potter could wave his wand and get rid of them. However, Pandolfi admonishes homeowner that “If there is any mention of them (magic, the occult, etc.) on the (practitioners) Web site, move on.” I Googled "ghost researcher" and got 992,000 returns, so there are more than a few of them out there. I did not go further to see how many mention magic.

He goes on to outline in scholarly fashion how the investigation should be conducted, including not letting the media in on the investigation (yeah, like I’m going to call a press conference and tell the media that my house is haunted), and making sure the investigators know how to use their equipment (Say, is that the Bensford Model 7000 Ghost Detector that you’re going to be using here? When did you have it calibrated last?). Apparently bad equipment might turn up false ghosts.

The kicker, of course, is the final section on Proper Ghost Removal. The part about getting your family minister to help you exorcise your house of the unwanted ghost is particularly cute. Can you imagine sidling up to the pastor after Sunday services and asking he if he can come over to your place on Wednesday night and help you get rid of a ghost? I suspect that he’ll be on the phone quickly trying to get you help, but not with your ghost. Pandolfi recommends using a sensitive medium to negotiate with the ghost to move on and stop living in your house. Perhaps, if that doesn't work you can hire a good lawyer and file a suit to have the ghost evicted. I wonder which court that would be filed in? Maybe Judge Judy could handle it, since she deals with odd cases every day anyway.

From a real estate point of view I suppose that ghosts can go either way. There is one school of thought that would classify a house with ghosts as stigmatized. Another school of thought might say that it just ads spice to the allure of a house. I guess it can’t cause too much harm, unless the ghost is that of Jimmy Hoffa and then the FBI will come and tear your barn down and dig up your yard. So, if you have ghosts, just think how much they will add to the fun of your house at this time of the year. Booo!

Wednesday, October 24, 2007

What's really cool...

Sherrie Mathieson has a book out titled “Forever Cool: How to Achieve Ageless, Youthful, and Modern Personal Style.” Apparently this book is aimed at Baby Boomers who are struggling with remaining “cool” as they age, or at least their perception of themselves as “cool”. The book is quite popular with Boomers and likely has some good advice for those who have not significantly changed their wardrobes or their “look” for the past 10-15 years.

One review I saw mentioned how un-cool it is (and looks) for the aging Boomer to continue to try to wear the tight jeans look or to go to loose fitting everything to try to hide middle-age spread. I would hasten to add that Boomer men, or even seniors who continue to bite on the “Just For Men” hair coloring ads, look even more ridiculous than if they just shaved their heads. An 80 year old “dude” with black, “Just for Men” hair comes off like someone wearing a really bad hairpiece. And, I’ve never understood the thing about not wearing socks with your loafers in the summer. Maybe that’s OK with boat shoes; but, to put bare feet into an expensive pair of Italian loafers has never made sense to me. But, I guess some think it’s cool.

In reading the reviews, it appears that the clothing advice is sound – updating your wardrobe without trying to imitate today’s youth. Mathieson has the good sense to advise sticking to the classics, but keeping them updated with modern fabrics and cuts. Things like the width of ties change every few years, so they need to be constantly updated. She does advise that today’s Boomers dress in age-appropriate clothing. It’s an ugly thought to try to imagine a 50-something Boomer wearing baggy hip hop pants that start below his rear end. – let’s not go there.

Mathieson picks out some icons from our current society to analyze, including President Bush (whom she says is cool in his blue shirts) and two Bills – Clinton (cool) and Gates (un-cool in his patterned shirts). No mention of Warren Buffet (likely beyond cool in whatever he wants to wear). Hillary Clinton gets the “dowdy” cut from Mathieson, while Laura Bush is “borderline” cool. Clint Eastwood is labeled cool, but Meryl Streep is called un-cool when not in a role.

I think I’d be happier with the title of the book if it was just ‘Forever Cool: How to Achieve Modern Personal Style.” We’re not ageless and never will be and as you get older, eventually you reach a level of maturity where being Youthful is no longer a goal or concern. Get comfortable with your age and stage in life and then you’ll find it easier to be cool with and about yourself and others will see you as cool, too.

Self-confidence and comfort with who you are is what leads to the wardrobe and other choices that show the world that you’re cool. If middle-age spread has prevailed over your infrequent trips to the gym, buy bigger clothes! You’ll look a lot cooler in a new, properly fitting outfit than by trying to continue to shoehorn yourself into those old tight fitting clothes from yesterday.

There are also tons of other things and possessions that people buy to try to look cool. Those who are truly cool don’t spend a lot of time or money on things just because they think or hope that others will think that they are cool because they own them. I usually think of that guy on the TV commercial who’s in hock up to his eyeballs, so that he can have the new car the biggest house, the club membership and all of the other possessions that he points out. In the end, he’s crying “Help Me!” So are lots of other “cool” people right now as the sheriff comes to evict them from their big, impressive, foreclosed homes.

So, maybe I’m doomed to be forever un-cool in the eyes of some; but, I’m comfortable with who I am. I’m comfortable with where I am in life and with the family and the home and the faith that I have. My personal style is unlikely to turn many heads, but I don’t feel bad when I look in the mirror. I get to Kohl’s for their occasional sales (every Wednesday is senior discount day) so my wardrobe stays somewhat updated and I don’t mind my graying hair. Middle-age spread got to me well before middle age, so I’ve been buying the bigger cloths for years anyway. I have no desire to be seen as youthful. I’d much rather be seen as someone with experience, wisdom and maturity that you can trust. If that’s cool with you, I’m cool with it, too.

Tuesday, October 23, 2007

The market velocity...


I take a lot of time up front, before I’ve even signed the home seller up to a listing contract to try to set realistic expectations for how long it might take to sell their house. I used quite a few statistics, some of which I generate from studying and accessing the data that is available on the local Multi-List Service (MLS). And some it it generated by my company or by other companies that specialize in real estate.

One helpful set of data and the charts that result from it is supplied to us by my company each quarter. It tracks the sales that have taken place in the last quarter and then looks at the current inventory and projects a time to clear that inventory. I call it the market velocity chart – how fast are things moving. In a crude way, you can forecast, based upon that chart, how long your house may be on the market if you put it on today.

The charts are done by county and are divided into $100K price bands. Within each County the townships and/or cities are shown as separate lines. Since I track mostly townships in the western part of Oakland County, I tend to track Milford, Highland, Commerce, White Lake and West Bloomfield Townships and usually have a feature on these statistics in my monthly newsletter. I keep all of the charts on my Web site – http://www.themilfordteam.com/market_stats.html – if you are interested in seeing them. Just chose your county.

These statistics are trailing indicators, since they are at best a couple of months old (it takes about a month to get the data compiled from the last quarter), but things aren’t moving that fast that they would be out of date. If anything the trends continue a slow decline, so these statistics might be a bit optimistic. What you can pick out of the charts are things like where to go to get the best selection of houses in a particular price band (if you’re a buyer) or which price bands have the most inventory and thus require the greatest level of aggressive pricing (if you’re a seller). They also should help sellers “get real” in their expectations of how long it might take to sell.

There are places (Milford is one) that show up in these charts with inventory in certain price bands in excess of 2 years. At one point the charts showed that Birmingham, Michigan had 5 years worth of houses in the $600K and above range. It’s still quite high there and in Milford the supply in that range is approaching 5 years worth. There are other places where the inventory in a price band may be 100-200 houses, but the velocity in that band and that location is such that they really only have 8-9 months of inventory.

These market statistics are just some of the things that your Realtor considers when he/she is working on pricing your home and on the marketing plan for it. If he/she comes back and tells you that it may take 9-12 months, don’t shot the messenger; they’re just trying to get your head on straight about the market; otherwise, it will drive you nuts. Remember the 3-P's of Real Estate (post of August 14). Two of the three - Patience and Persistence - are required in great quantities in this market. Of course, the third "P" - Price - has a lot to do with it, too.

Monday, October 22, 2007

What buyers want...


I was reading one of the real estate trade publications that I get yesterday and there was an article about the 2007 National Association of Realtors (NAR) survey of buyers. Every year the NAR goes out and interviews hundreds of buyers to find out what they are thinking, what things they want in a home and how they feel about things like the real estate process and the agents that they encounter. This article focused upon what the buyers say they are looking for in a home.

It’s always an interesting chicken or egg conundrum trying to figure out whether the builders are putting stuff in because people asked for it or whether some builders are actually setting the trends by building stuff in that people end up liking. It’s likely a bit of both, especially in the Midwest, which is not exactly known for being cutting-edge with anything new in fashion or home features or anything else.

Anyway, most of the “Most Desired Home Features” in this article weren’t exactly earth shaking new things. The most desired features that respondents to the 2007 NAR survey listed were:

Feature -
Central air conditioning - 1 (Apparently being cool in the summer is an enduring requirement, since this feature was also number 1 in the 2004 survey)
Oversize garage - 2 (This has got to be a "guy thing.")
Walk-in closet in master bedroom - 3
Backyard/play area - 4
Cable/satellite TV-ready - 5
High-speed Internet access - 6 (Well, of course. One couldn't live without this feature.)
Separate shower in master bath - 7
Patio - 8
Fencing (fenced back yard) - 9 (For both pets and kids, I suspect)

I find the choices on this list fascinating, since I’m not yet seeing the demand for some of these things. I’m still seeing demand for large, gourmet kitchens and large master bedrooms with baths that have separate showers and tubs and walk-in closets. I guess I can also agree that the Cable TV and Internet access are big requirements locally. The backyard/play area/fenced yard things kind of go together and I do see some demand for that, but it likely wouldn’t make the top of the list for the buyers with whom I’ve been working lately.

There were other categories explored in the article that covered things like “Very Important Home Features” and I can tell you that there were no surprises on that list and all are in demand locally, from walk-in closets and jetted tubs to granite top and hardwood floors.

In the category of neighborhood features, I was a bit surprised to see that sidewalks as a desired feature of the neighborhood had slipped a bit from being demanded by 27% of the 2004 respondents to only 25% now; while being near shopping went up from 22% in 2004 to 25% now. I guess people want to shop more, but don’t necessarily want to be able to walk to the shopping areas. People were also less concerned about being close to parks and schools, but having public transportation increased in demand.

The current “green” movement also is having an impact on buyers with 94% of older buyers being concerned about energy efficiency and 80% 0f younger buyers also expressing a preference for energy efficient homes. This is offset somewhat by the continuing trend to bigger is better in homes, which still leads to total energy consumption going up.

Even with all of this data, I think the real number one feature that most of the buyers that I’m working with today is affordability. People would live to get all of this stuff and get it cheaper. That’s the dilemma facing builders right now. They started putting all of this stuff in bigger and bigger houses and ended up with home that most people couldn’t afford. The builder who figures out how to put all this into a little bit smaller home for a lot less money will be sitting on a gold mine.

Sunday, October 21, 2007

Open Houses - marketing tool or waste of time?


While 80 percent of home buyers used the Web to search for properties, only 42 percent visited open houses last year, reports the NATIONAL ASSOCIATION OF REALTORS®. That interesting statistic got me to thinking about the effectiveness of open houses. I’m about to leave for one today. I do them a lot; and, lately, I’ve been spending quite a bit of time sitting in open houses with nothing to do but think about things. Open house attendance has been down for quite some time now. In locations where I’d get 8-10 couples through on a Sunday afternoon, now I see maybe 2-3 couples, many times none.

There are just fewer people out driving around looking for open houses to visit. In fact, many of the people that I do get through open houses that I hold tell me that they saw it advertised on one of the Web sites that I post them to; so, I guess that verifies the opening statistic, too.

The rest of the story where the opening statement came from was about why agents still do open houses. There are two main reasons – 1) sellers demand them because they think the agent is “working” then; and, 2) agents usually pick up buyer clients from among the visitors. I must admit that I’ve sold two houses in the last couple of years to people who came through them during open houses, so I’m one agent who can’t say that open houses don’t sell the house. Open houses are just one component of an overall marketing program to get the house the most exposure to potential buyers.

I do have some customers who don’t like or want open houses. They have concerns about crowds of people going through and maybe not being able to watch them carefully enough. That scenario doesn’t happen very often lately; but I have had occasions where 2 or 3 couples were in a house at the same time. It’s impossible to watch all of them all of the time, so I just try to make sure that I see each group as they exit to answer questions and to make a quick check for bulging pockets. I’ve never had that happen, but I suppose it could.

I also have some customers who just live too far out in the country to make holding the house open worthwhile. It’s hard to attract people with road signs when you’re 10-15 miles from the nearest town or shopping area. The times that I have held country homes open what visitors I had were mostly people who had seen the house and the open house notice on the Internet.

So, are they worth it? To the agent; yes, if the house is in a good location. To the seller; maybe, again, if the house is in a good location for traffic. Sellers need to understand that holding the house open is not an indication of the agent working hard for them. It’s just one aspect of an overall marketing program for the house. Some marketing programs will not have this component and some will; that is up to the agent’s call. If you believe in the agent, then give them the opportunity to execute their marketing plans for your house. If it doesn’t work out, then give me a call and let me try my marketing plan. I’ll likely have open houses as a part of the plan.

And if you're out today, or most Sundays, stop by my open house. You can find out where I'll be by going to my Web site www.themilfordteam.com and click on the What's Open link or go to the My Current Listings and see what I'm holding open. See you there!

Friday, October 19, 2007

Hope Now, but maybe heartbreak later...


As reported in several news services; a new alliance, called HopeNow, was announced by Treasury Secretary Henry Paulson this week. The alliance has some of the largest lenders and servicers that collect payments, a handful of housing counselor networks, and a group representing investors who hold mortgage debt. It is intended to coordinate efforts between servicers and counselors to provide "workouts," which can include lowering the interest rate on a loan, spreading out past-due payments over the life of the loan or a short-term repayment plan. But some who counsel distressed homeowners say the alliance won't resolve key issues.

Some believe that loan workouts have been difficult in part because of a lack of communication. The alliance members have agreed to provide dedicated teams to rectify that, a move borrower advocates commend. But some of the advocates say the alliance shows signs of being more talk than action."[It's] a smokescreen for not doing anything. It's a PR gimmick. Having a process without a realistic opportunity for results is setting the homeowner up for failure," said Bruce Marks, founder and CEO of the Neighborhood Assistance Corporation of America (NACA).

Marks and Michael Shea, housing director of the Association of Community Organizations for Reform Now (ACORN), said they are highly skeptical because of the reluctance they've seen among many of the alliance members to modify loans to levels affordable to borrowers. In addition, they say, lenders have relied on temporary concessions that potentially just postpone rather than prevent foreclosure.

Marks and Shea support a suggestion made by FDIC Chairman Sheila Bair last week. She called on servicers to permanently freeze interest rates on subprime adjustable-rate mortgages (ARMs) for those homeowners who are current on their payments and whose rates have yet to reset. Part of her reasoning: evaluating loans on a case-by-case basis is taking too long, and time is of the essence. Roughly 1.3 million subprime ARMs are due for a rate reset between now and the end of 2008, according to data from First American Loan Performance. Monthly foreclosure filings are nearly double what they were one year ago.

I must opine that this does not seem like the rocket science that the loan companies are making it out to be. Just freeze the rates that are set to explode on the ARMs and see what the fall out is then. It would seem to be much easier to let the people who are currently struggling, but able to make their payments at the current rates at least stay out of foreclosure. It makes no sense to force them into foreclosure and then try to wring a little bit more out of them in make-up payments. If the homeowner can’t even keep up with the current payments; well, then maybe he/she did overreach and a case-by case process to look at weather it is worth a work out attempt should be made.

The loan companies are starting to look more like classic mob loan sharks. They are displaying the loan shark attitude - “Yeah, we gonna work it out, I gonna break your knees, dat’s how we work it out.” I fail to see what they have to win by foreclosing on a property and then selling it for 50 cents on the dollar. That is what they are doing now. After all, these are the same companies who were running the ads last year that screamed “No documentation, no jobs, no visible means of support…no problem we can give you up to110% financing on the home of your dream.” Who can blame the innocent (if a bit ignorant) home buyer for reaching for that brass ring. After all, as these companies themselves touted, “it’s the American dream.”

So, is there indeed hope now? Somehow, with the tight connections that have been evidenced in the past between various Bush administration appointees and the fat cats who bankroll the boss, I seriously doubt it. But, any port in a storm and this is certainly a storm; so let’s hope that some good comes out of this alliance, even if it mainly a PR effort. Maybe the banks will get shamed by the press coverage into doing some good after all. But then, shame has never been a big attribute of those people, has it?

Thursday, October 18, 2007

Buying distressed homes...



As I mentioned in an earlier post (see my post of September 13), I’m spending about 50-60% of my time showing bank repo houses to potential buyers. Foreclosures go through at least three stages in Michigan, so I thought it was time to look at them from a buyer’s perspective.

• Pre-Foreclosures

In the pre-foreclosure stage, investors will likely be able to do the most good for the distressed homeowner and for themselves. Pre-foreclosure is where further damage to the home owner's credit rating can be forestalled and the home may be transferred at a mutually-agreed-upon price before it is necessary to get the lender involved. The best potential leads to locate a property at this stage may come from real estate agents, or through business associates and friends. There are local legal newspapers in most communities that list homeowners who are in this early stage of default, but not yet in foreclosure. Word of mouth is also a very viable way to find out about distressed homeowners, especially in a smaller neighborhood or sub.

It’s during this period where the homeowner has fallen behind and may negotiate with the bank to put the foreclosure process on hold temporarily and allow for a “Short-Sale” of the property, where the bank agrees to take less than it is owed, just to get the house sold. Unfortunately, many delinquent homeowners don’t take advantage of that option with their lenders. Many times you will see For Sale By Owner signs pop up during this time, because the sellers think they can sell the house and save the money that they might have to pay a realtor to market it – a big mistake that usually ends in failure. For listed properties, you will see the words “Short Sale” in the listing information. Remember that the bank must approve any offer that you make for the place during this time and the sale could still fall apart if the bank and the delinquent owner cannot agree on what to do about the difference between what you are offering and the amount owed on the house.

• Foreclosure Stage

In the next phase, when a property is at the foreclosure stage, the best way to identify a potential property is through the public records at the County Clerk's office. Find out where the notices of default are filed and determine how to sort through the general index to discover pending foreclosure sales. In Oakland Country, Michigan thee is a paper called the Oakland County Legal News where all official court proceedings are posted – including all foreclosure notices. You can subscribe to that newspaper if you’d like.

The foreclosure process itself will vary from one state to the next, depending on whether it is a title or lien state, which determines whether a judicial or non-judicial form of foreclosure is involved. Judicial foreclosures pertain to mortgages, rather than deeds of trusts, and take significantly longer to complete. Michigan is a judicial state, so expect a longer (6-8 month) process

In Michigan, a Sheriff’s Sale takes place usually after the banks has gone through about 2-3 months of delinquent notices and attempts to get the delinquent homeowner to get caught up. The lender always ends up buying the property back at the Sheriff’s sale and that sale starts a six month redemption period clock running; during which time the delinquent homeowner can “redeem” the house by paying off the amount due and any penalties that have accrued. The foreclosed homeowner is allowed to live in the home for those six months without having to pay anything to the bank. It's during that six months that homes sometimes get damaged by vengeful owners taking out their frustrations.

If you purchase a home in this stage you’ll likely not get a free and clear title to the place, since he original owner still has a redemption claim to the place. You may just receive a Quitclaim Deed from the bank during this period. You will be able to clear that up later, if the redemption period ends without the old owner exercising that claim by paying off the old debt. However, there is a chance (slim as it might be) that the foreclosed homeowner will come up with the money to redeem the house after you have “bought” it and they will have a valid claim to taker it back. You’d be out the house, but you’d get your money back.

• Post-Foreclosure

The last stage is the post-foreclosure stage, where the lender has already taken control of the property. In a worst case scenario the bank had to have the Sheriff evict the old homeowners – a nasty process at best. The home is then in the possession of the lender's REO (Real Estate Owned) department. Banks really don’t want to hold onto these properties for long, since they are a cash drain (even minimal maintenance costs something); so you’ll likely see a dramatic price reduction as the bank dumps the house. Some banks will hold out for 3-6 months at the old pre-foreclosure price before dumping the price to get rid of the house. By this time the house may have been abused by vandals or deteriorated somewhat, if it was abandoned. You will likely get a free and clear title at this stage This is a stage that usually doesn’t last long after the bank has decided to dump the property. I’ve seen banks dump the price and sell the property in 2-3 days; so, you have to be ready to act quickly when you spot one of these “get rid of it” prices. Expect also the full Sgt Schultz routine (see my post of September 22) from the banks at this stage, including no negotiations of any repairs or concessions. This is full panic-mode, get out time for the bank.

In any of these stages, but especially in the last two, it is important to get a good home inspection done, even if you have to pay extra to get the house de-winterized and re-winterized in order to do the inspection. Once the house is unoccupied the banks will likely have all of the utilities cut off and have the house winterized (all water drained from the pipes) to avoid any winter pipe freezing issues. During the winter months it's advisable to take a flashlight with you to any of these homes, so that you can see in the basements as you're going through them. You should also check with the local township or city to see if there are any outstanding bills (water, taxes, special assessments, etc.) that need to be paid on the property and make sure that the bank acknowledges that they are responsible for paying those debts off from their proceeds and not passing them through to you.

Buying a foreclosed house can save you a lot of money; however, it requires a higher level of caution and due diligence in the process than would be the case with a normal house sale. Your Realtor can help with that and can manage the process through for you. My company has created a special Web site just for foreclosed properties - http://ourforeclosurehomes.com/ go there to start your search. Once you have found some properties that look promising, give me call and we'll go see them together.

Wednesday, October 17, 2007

Not necessarily the news...



I seldom watch more than half of he NBC Nightly News show anymore because the second half is all fluff – entertainment features. Last night's NBC Nightly News with Brian Williams was perhaps one of the worst examples of how degraded and degrading our supposed “newscasts” have become in our modern, ratings-happy, entertainment-oriented TV world.

Yesterday the leaders of Burma defied world opinion and the U.N Security Council and stated that things would not change in Burma, yet Brian Williams and NBC News saw fit to devote a portion of his “newscast” to the story of Ellen Degeneres crying about a rescued dog that she gave to a family.

Yesterday Turkey announced that it may restrict access to U.S. airbases in the country if the U.S., House passes the pending resolution calling the killing of Kurd genocide; yet Brian Williams and NBC News ran footage of a crying Ellen Degeneres saying she was at fault for the dog incident.

Yesterday the U.S. Secretary of State called for the creation of a Palestinian state, but Brian Williams and NBC News was more concerned about the story of Ellen Degeneres and the dog that a family had to give back to a rescue group.

Yesterday 18 airline workers were arrested and accused of being a part of an international drug ring, yet Brian Williams and NBC news chose to focus upon Ellen Degeneres breaking down on her TV show – an NBC show it might be added for full “news” impact.

Yesterday Verizon admitted to giving federal authorities millions of phone records as part of an on-going effort to thwart terrorism, even if it subjugates the privacy rights of U.S. citizens; but Brian Williams and NBC News was more focused upon the Tears of TV personality that the rights of the average citizen.

Yesterday Alan Greenspan said in a new conference that the chances wer less than 50-50% that the U.S. would going into a recession, but the chances were 100% that Ellen Degeneres would break into tears on camera and that was “big news” to Brian Williams and NBC news last night.

There is a higher probability that you will see more on the Ellen Degeneres story this morning on NBC than there is that you will see anything on any of the important real news stories of the day. Why? Because the news is now an entertainment outlet; and, no longer tied to ANY journalistic principals.

There is an opinion page article in this week's Business Week magazine by Jon Fine that basically says the same thing. Fine opines that the main reason that these pseudo newscasts are kept around is that they make money and fill time that would otherwise be tough to program for. In the article Fine pointed out that the average age of the viewers for these "newscasts" is a little over 60, so I guess I'm once again lumped in with the Boomers on this point. Fine argues for keeping these vestiges of the past around; mainly because there is likely little of any value that the networks could offer in the same time slots.

There are old clips of all of the old newsmen that came before Williams (and if truth be told, before Tom Brokaw), as an intro to the show; all of whom must be steamed or rolling in their graves at what has happened to what was once a real news show. I think they ought to just let Mary Hart or maybe a Howe Mandell host the show and stop any pretense of it really being a news show. The NBC Nightly News has become an intro segue to shows like Entertainment Tonight or Access Hollywood. You have to go to the BBC or to Public TV to get a real newscast anymore. What a pity.

Tuesday, October 16, 2007

A tough row to hoe...

We have been in a very tough market for over 18 months now, with home values down, too much inventory on the market and too few buyers out looking. This is a market in which even the best and most experienced Realtors are having trouble dealing with, when representing sellers. I can’t imagine how tough the row is to hoe, if a homeowner jumps into this market trying to sell his/her house them selves.

As a real estate professional, I have access to all sorts of marketing tools to assist me in marketing the house. I put it on the local Multi-list Service (MLS) and through data exchange agreements it then goes out to several other regional multi-lists or at least their agents have access to my listing. That immediately puts over 5,000 Realtors in the region on my selling team. I put my Real Estate One sign in the yard and that immediately tells potential buyers that this transaction will be handled through a real estate professional who has all of the forms and services at his/her disposal that are necessary to take a sale to a successful closing.

You would not believe how many buyers have told me that they just won’t stop or call on a For Sale By Owner sign just because they don’t feel comfortable dealing directly with the owner. Buyers prefer that there be a third party in the middle. They also worry that an unrepresented seller may make major mistakes in the real estate sales process and they’re right much of the time.

I put each listing on the Web. In fact, through the agreements that my MLS has with several Web search engines and that my company has with several site; the listing goes out to over 100 Web sites around the United States. I do a just listed mailing to the neighborhood. An unrepresented seller might do that, too. I do a virtual tour of every listing, which an unrepresented seller would likely not do. I have enhanced listings on Realtor.com (the #1 Web search site for real estate) which allows me to put multiple pictures and the virtual tours o the site, as well as providing special, attention-grabbing features. An unrepresented seller isn't even eligible for that service.

I also do open houses, which a homeowner could also do; however, I take care of all of the advertising at my expense and have multiple lead-in signs to make it easy to find. I have other tools, like automated telemarketing systems to provide information about the house or television shows that focus on just real estate or various real estate books and newspaper ads. Some of these things an unrepresented homeowner could also do, but I pay for these when I’ve listed the home, as part of my marketing expense.

Probably the most important service that a good Realtor can provide, to help sell your house faster is to price it right in the first place. Overpricing the property is the single biggest mistake that most unrepresented sellers make. It is sad that even after getting professional advice, many sellers still ignore that advice and put their homes up for too much. They are just wasting time and the buyers see that.

There have been numerous studies done over time that consistently show that homes that are sold by unrepresented home sellers stay on the market longer and end up bringing less to the seller than those that have Realtors representing them. Most unrepresented sellers don’t want to see those studies or don’t want to believe them, but they exist and they are consistent and convincing. The real estate market is a tough row to hoe right now and sellers need all the help they can get. Save yourself time and end up with more money by calling a Realtor. Better yet, just call me.

Monday, October 15, 2007

Ghost Town, could it happen here?

There is a site on the Web that tracks ghost towns in various states. If you Google ghost towns of Michigan it will be the top result. I’ve travel by some of these ghost towns, as well as through a number of towns that while not abandoned are certainly shadows of their former glory days (Calumet, for one), when my wife and I spent a week exploring the Upper Peninsula several years back. I got to thinking about it and wondered could it happen here? That’s one of the nice things about blogging – you can let your imagination loose a bit and then write about it.

Most of these ghost towns and near-ghost towns were once thriving towns (some even cities) whose local industries went away. Without their economic engines to bring in money the towns ceased to have a reason for existing and eventually faded away, some relatively rapidly. Most of these ghost towns in Michigan were dependent upon either forestry or mining (mostly copper) and when either the demand petered out or the market moved to closer suppliers for the products, the industries failed and so did the towns. There are a few towns Up North of course that hung on and are still there today. You can visit them (and tourist traffic is a significant part of their livelihood now) and still see the remnants of the grandeur that they once had.

I got to thinking; what would happen to Detroit and the surrounding area, if the automotive industry as we know it went away? Would Detroit become a ghost town? Not likely, but it certainly would change significantly. I suspect that 50-60% of the area’s economy (maybe more) is directly tied to the local auto industry – OEMs and suppliers. If that went away (or went south, as is more likely), maybe Detroit could survive on what’s left and on the gaming industry. Maybe we’d become like Atlantic City. Of course we also have Automation Alley – the 3-4 county combined effort to attract high-tech businesses to the area. Undoubtedly there would continue to be high-tech interest in the area. And, the Detroit area is still a major educational and medical hub for the state.

So, we are not likely to become another Calumet, one of the UP’s near-ghost towns; however, we are undergoing some dramatic and basic structural changes in the major industry that drives our local economy and much of the economy of the state. The issues caused by this disruptive change are not short term and will impact things in all sectors of the economy and in the housing industry for years to come. Right now the housing market is being driven by foreclosures and other distressed homes sales. Buyers are looking first for these bargains and the pressure of these sales is driving down sale prices throughout the market. That trend is likely short-term. We’ll burn through the foreclosed homes inventory fairly fast.

Longer term, the recent home devaluation is certainly a historical anomaly and certain to be reversed as soon as stability returns to the economy. And, the recent lack of buyers in the market, caused by job uncertainly locally, is sure to change and unleash a wave of pent-up demand upon the market. I’m starting to see some of that already (see my post of September 25 – Light at the end of the tunnel). So, I guess we won’t all have to get jobs as tour guides through the ghost town called Detroit, and there will likely be fewer of us left when all is said and done; however, we’ll still all live on our spectacular peninsula, with more blessings to count than most of our fellow countrymen. And, if we want to see a ghost town, we have our own in the UP, eh!

Sunday, October 14, 2007

Functional Obsolescence

Functional obsolescence in real estate is defined as - When a property’s value decreases due to its poor design, style or lack of modern facilities. Functional obsolescence is one reason why a home might drop in value. For example, the market value of a home that doesn’t have enough electrical power to run a dishwasher, microwave and hair dryer at the same time will steadily fall. Other than functional obsolescence, a property can also lose value due to poor maintenance or a slump in the economy.

This concept in real estate is one that is sometimes tough to get across to sellers in a way that doesn’t offend them. Before I got into real estate I lived for 21 years, starting in 1978, in another part of southeastern Michigan in a nice quad-level house. We raised our family there and I always thought the house was great. When I went to sell it in 1999 my agent tried to tell me about this concept in real estate called functional obsolescence, since tri- and quad-level houses had pretty much fallen out of favor by then, as had bi-level houses, sometimes called raised ranches. I didn’t understand and, of course, priced my house too high. It took longer to sell than I had hoped.

Now, after 5 years in real estate sales, I have a really good grasp of this concept. I’ve had (and have) a few of the homes that fall into this category. They were great homes when built and many are still very good homes. It’s just that people no longer think that bi-, tri- or quad-level homes are cool. So, they are harder to sell. People still prefer traditional colonial or ranch homes to those styles. Other styles that seem to be OK with today’s buyers are the Cape Cod and contemporary (so long as that doesn’t involve too many levels). That’s not to say that bi-, tri- and quad-level homes won’t sell at all – they will – they may just take a little longer to sell, because the pool of buyers who still likes those styles is smaller now.
Keeping in mind the whole definition above, homes that have outdated electrical, plumbing or heating/cooling systems are also functionally obsolete. I had a absolutely beautiful colonial home a couple of years back that stay on the market for far longer than it should have because in the basement was a huge “spider boiler” – a big old cast iron boiler with pipes and ducts running off it everywhere that makes it look like a giant spider. Several knowledgeable heating contractors told me that the boiler was an industrial type that would likely last for 50 years or better. Getting parts for it, should anything go wrong, was another matter. So, it scared the heck out of most potential buyers.

I’ve had the same thing happen with old, fused-based electrical systems. They just scare off many buyers; and, in many cases, they do prove to be a real restriction on modernizing the house, especially if the service is too small (under 100 AMPS). It may be a case of over-reacting but it happens. Many buyers also look for plumbing that isn’t the old cast iron pipe type or even the newer PVC-type, since both are purported to pose potential health issues. Some buyers will also walk away from homes that are heated with steam or hot-water baseboard systems; even though those are very efficient types of heating, because they generally don’t allow for central air conditioning.

So, what can the seller do? If it is something like an outdated boiler or electrical system, the seller could get those items replaced. Sure it costs money; and, that money is not likely to be recouped on the sale. But, if spending that money up front means a sale that takes place six months to a year earlier than might happen otherwise; that is money well spent. There are too many things that one cannot do anything about – how does one change the architecture of a tri-level house? Anything else that can be seen as obsolete and that can be changed should be dealt with before listing; or, the owner should figure the replacement costs into his/her pricing of the home.

A couple of areas that are more expensive but could be dealt with during the homeowners time in a house are the baths and kitchen. Many houses built in the 60’s and 70’s had only one bath, maybe a bath and a ½. Finding a way to add that second fu bath would help with the value when it comes time to sell. So, if an addition of any kind is in the cards; maybe, you could add another bath as a part of that project. The kitchens in 60’s and 70’s houses (even into the 80’s) were small by today’s standards. Many were the type that was boxed in with soffits from which cabinets were hung. Opening up those kitchens by removing the soffits can work wonders. Many homes were divided up into small spaces – a small kitchen and a small breakfast room next to it. Opening up that space into one larger area can make the home look more modern. You can’t overcome all of the layout limitations built into a 60-70’s home, but you can make them more modern looking and inviting to today’s buyers.

Saturday, October 13, 2007

Home warranties

A home warranty is an insurance policy that covers the repairs of some of the major systems and appliances in the home, usually for the first year that you own the home. Even newer homes can have problems with plumbing, or the heating and cooling system or some other system. Many of those problems may not be covered by the builders warranty or the appliance warranty, so even with a new-build, getting a home warranty may be a good thing.

The way they work is that you call the company that has your policy whenever anything that is covered goes wrong and they handle sending out a service/repair technician to look at the problem. There is an initial deductible on all of these policies of between $50-100. That deductible covers the initial service call, but is normally returned if the service person ends up diagnosing a problem that is covered under the policy.

The normal policy of these companies it to try to repair the system or appliance; however, if repair parts are not available they will replace the item with a similar unit. In the case of units that have new federally mandated standards, like the new coolant requirements on air conditioning units, there may be no alternative than to replace, rather than repair. Some home warranties cover this “upgrade” to the current standards and some don’t.

For service oriented work, like unstopping plugged up plumbing; different companies have different policies about what is covered; such as if the problem turns out to be something like tree roots in the sewer line. These policies don’t cover things like a roof leak caused by ice damming (that should be covered under your homeowner’s insurance policy); however, they do have a “limited coverage” for normal roof leaks due to normal wear and tear. You really need to read the policies closely to understand what is covered and what is not.

As with all insurance policies there are advocates and detractors for these policies. The detractors seem to be the same people who have trouble with anything that asks them to follow a set of rules. They claim that having to use the companies’ assigned repairmen is too restrictive. In some cases, that may be the case and these policies don’t cover certain areas because they just don’t have the contractors in place to cover them.

The insurance companies also don’t cover pre-existing conditions and may ask you to prove that the system was in good working order prior to closing (a home inspection report to that affect is usually enough proof). Advocates say that having the peace of mind that you aren’t going to get hit with a major bill of your heater or hot water tank goes out is worth the effort to use the company repairmen. After all, few of us have a relative or a friend in all of the building trades that we might need to get home repairs done, especially in an emergency.

The company that we tend to use is First American, which has a fairly inclusive policy, covering most of the major stuff that can go wrong in a house. All of these policies have extra things that you can get covered, for more money, of course; including swimming pools, well pumps and other things not covered in the “standard” policy. As with all insurance policies, by almost any company in the business, there are lots of exclusions and fine print, so the buyer is advised to really read the policy before calling for repairs.

While these policies are set up to provide limited coverage to the sellers during the listing period, I normally advise sellers to wait until the buyer asks for a policy. Having a home protection warranty doesn’t seem to be a major selling point, and throwing one in as part of the negotiations is a nice little kicker to have in reserve. The cost is fairly nominal at about $400, which the seller pays at closing. On balance, I think these policies are a good thing for buyers and I always advise my buyer clients to ask for them. In the overall scheme of things they are relatively inexpensive; so, if the home seller refuses to buy one the buyer might be well advised to go ahead and buy it him/herself.

Friday, October 12, 2007

Shop 'til you drop


Lately we seem to see the "shop 'til you drop" syndrome extending to real estate. There are just so many choices (too many, most would say) that home shoppers get caught up in the process and have difficulty making a decision on any one home. There always seems to be one more listing to look at, one more new home on the market, one more foreclosed or distressed bargain on the horizon.

I suppose that we Realtors are partially to blame. We keep sending listings or signing people up for those automated programs that send emails every time a new listing comes on the market. But, the buyers themselves have to share in the blame. Many don't really have any idea what they're looking for in a home. I get the line, "I'll know it, when I see it" a lot. What that's really saying is I have no idea what I want. Buyers should always start with a list of the features and locations and other things that they want in a house. They should actually have "must have" and a "would like to have" lists. They should also have a good idea of where they want to be, for whatever reasons - time to work, school district, proximity to shopping or whatever.

Home shoppers should also be pre-approved, so that they know what they can afford and so that they can act decisively if they do eventually find the perfect house. I can't tell you the number of times that I've spent weeks or months searching with a buyer, only to find that they can only afford about one-half of the house that we've been looking at or that we lose the house that they wanted, while they go through the loan pre-approval process before making an offer.

I advise buyer clients to take time after every 8-10 homes that they may see and assess why those homes didn't fit and how they can change what they tell me they're looking for from that experience. Asking, "Why wouldn't I buy that home?", after each home also helps clarify for the home shopper what features are really important. Use those insights to help your agent fine-tune the searches that he/she does, so that you don't waste a lot of time going out to see homes that you already know you won't like. Also take the time to do the "desk work" of looking through the listings that you've been sent thoroughly and eliminating those that would likely just waste time.

Some view aimless shopping in the malls on weekends as sport or entertainment. Wandering around looking at houses is only fun for the first few houses, then it becomes a pain for everyone involved. So, get prepared, do the homework and don't plan on shopping 'til you drop.

Thursday, October 11, 2007

Generation whatever...



I reported in and earlier post that I subscribe to an e-newsletter from an outfit called Iconoculture. They purport to track trends at both a macro and micro level for various subdivisions of our society. They have quite elaborate sub-classifications or at least a nice set of names for groups, sometimes more than one name. I got confused by all the names that are used, so I did the logical thing – I Googled it. After wading through a bunch of sites where I tried to find the boundaries of various groups, I came to these conclusions.

I’m either a pre-Boomer or an older-Boomer, since most of the people considered to be Baby Boomers were born after WWII, a bi-product of the soldiers coming home from Europe and the Pacific. Since I was born during the war (a bi-product of my father having a job teaching WWII aviators at a ground school during the war), I’m sort of pre-Baby Boomer. Anyway, the Boomers were born in the years 1945-1964. I suppose the date range is so wide, because this generation also embraces the children of Korean War vets, too, and allows for war vets who put off having children for a long while.

Generation-X (Gen-X) is next with a range of 1964 to 1979, so I have 2 Gen-X children. Next is Generation-Y, which is defined as those born between 1982-1994 and are also called the MTV-Generation, Echo Boomers (the children of the Boomer’s children) and the Internet Generation or sometimes even Generation-C. Apparently there is already a label awaiting my grandchildren – born after 2000. They are being called Millennials. The marketers are not yet too concerned about their buying habits, since they can’t even pick out the diaper brand that they are wearing. Just wait until they get old enough to influence mommy and daddy on what cereals they want. Gen-Xers appear to be leading the “Green” revolution in housing and Gen-Yers are the ones for which Toyota designed the Scion brand. I’d guess that Metamucil would be the brand sponsor for my generation.

Quite honestly, I’ve always rejected being labeled like this and being thrown into a “bucket” with everyone else who just happened to be born within a certain date range. I think that is one of the characteristics of my generation. And that is really the point of countless studies and sites like Iconoculture. There are characteristics which can be identified that are ingrained in people who grew up in certain eras. They are “values” or “beliefs” or predispositions that, if known by marketing people can be leveraged to influence the buying patterns of those people – at least that is the theory. This same attempt at “profiling” was the basis for a class that I took last year on dealing with older home buyers. Some of the home-buying decision criteria were logical consequences of dealing with an aging and aging and frail bodies – everything on the first floor, for instance - and some were just stereotypical predispositions attributed to people of certain ages – being skeptical of salesmen for instance.

I look back at my childhood, and how it may have shaped who I am today; and, I can now see or understand some of the good and the bad influences that are still there today – remember those little characters, the “good” little angel and the “bad” little devil, who sit on cartoon character’s shoulders and advise them abut things,. That is the kind of thing that gets into ones character because of what was happening and how things were when you were a child. Those things eventually help define the values of these Generations and how they react to the current world around them. So my younger days spent watching Howdy Dooty, Sky King, My Friend Flicka, Lassie, The Cisco Kid and later, Leave It To Beaver, Father Knows Best, Doctor Welby, Mayberry RFD on TV have all influenced me to be the way I am; just as the current TV fare is influencing today’s youth (heaven help them!).

Of course, much more than just TV or entertainment in general influences generations. I suppose that I lived my youth in simpler times; certainly they were times that were slower and less communications intensive. I don’t fear for today’s youth. They have opportunities in front of them that would have been unimaginable in my youth ad access to means of learning and growing in knowledge and maturity that we just didn’t have. I just hope that they never lose the chance just to be kids for those glorious first 16-18 years when society gives them an understanding pass on maturity and expectations. Whatever Gen they’re in, kids deserve a chance to just be kids. That’s why I chose the one icon from my age that is known to people from all of those generations and whom has withstood the test of time – Alfred E. Newman – as my graphic for this piece. What, me worry?

Wednesday, October 10, 2007

Not Made in China...


I get a little e-newsletter thing from a company called Iconculture, which claims to be a source for cultural information about the various consumer generations in America. Apparently they make their money by keeping track of what the various generations are doing and buying and then sell that insightful information to companies. They actually divide up the U.S. population up into several generation categories and then further subdivide those categories and try to keep track of trends within each group. More on that in a future post.

In any event, the Iconoculture folks had a piece in this week’s newsletter about a couple (younger, Generation-Xers it was noted) in Utah throwing want they called a “China Free” birthday party; where everyone was advised to bring only presents that were not Made in China. This was due to the recent recalls and scare about lead-based paint in toys that were made in China.

Having already opined about the unsustainable behavior that I see every day (see my post of September 24), I found this to be mildly amusing. It seems to take some form of tragedy or threat of tragedy to mobilize the American people to recognize and maybe start to do something about things that are bad for us; whether that be lead in the paint on our toys or the fact that most of the manufacturing for our children’s’ toys is now in China – either and both should alarm us and both are basically wrong.

Maybe some good will come of all of this; if, because of parental concerns about the safety of their children’s toys, they stop buying Chinese made toys and actually start looking for U.S. made toys. That would be a very difficult search, given how long we’ve ignored the movement of our domestic manufacturing jobs to overseas locations. According to the Toy Industry Association, roughly 80% of the toys sold in the U.S. are made in China. I did find a Web site called http://www.usmadetoys.com/ that claims to show toys made exclusively in the U.S. The choices are fairly slim; but, that’s what we’ve done to our domestic toy industry, so maybe that's what we get.

Of course the big toy companies will extol the virtues of the cost savings that they achieve and pass on (a portion anyway) to U.S. consumers by pursuing their globalization strategy (read that Made in China). Lately, they’ll also be mouthing lots of words about taking more responsibility for the quality and safety of the products that they bring in from China and elsewhere; but you just wait and see if they actually do anything differently or just try to wait this thing out; in hopes that the whole thing blow over, so that they can get back to business as usual. If there’s one thing that they can count on, it’s that Americans seem to have an incredibly short attention span for things like this current toy crisis. But that’s fodder for another whole posting, too.

I suspect that it would actually be impossible – not just inconvenient, but impossible – to have a China-Free Day in America- a day where we protested by using nothing that is Made in China for 24 hours. I would have suggested a day where we protested anything manufactured outside the U.S., but I went through my clothes and realized that I’d have nothing to wear, if that was the case. In fact, going through my closet was like an exotic geography lesson – Honduras, Bangladesh, The Philippians, India, Colombia, Nicaragua, Mexico and more came up; but not one U.S. location. And, where is our domestic clothing industry today?

So, let’s see how the Gen-Xers do in their campaigns to protest the threats from China. The best protest that they could launch would be for a few of them to start some new, U.S.-based toy companies that hire U.S.-based workers and use U.S.-based raw materials. Wow, now there’s a thought!

Tuesday, October 9, 2007

Give your house a mini-makeover


I watch that show on television that does the extreme home makeovers, both for the makeover part on the home and for the human interest aspect of the families that they choose. There’s nothing like a good tear-jerker tale to start the week off. Most of the time, it seems they end up tearing down the original house, rather than really making it over. I used to watch the makeovers on the show “Queer Eye for the Straight Guy” and they most often just worked within the confines of the existing structure and really did makeover the interiors (as well as the owners).

I generally advise clients that the time to do major makeovers, like the kitchen or baths is not once you’ve decided to sell. You just won’t get the money back out and most sellers try to do that and end up overpricing the house. Hopefully you’ve done the major updates and upgrades as you went along, living in the house; so that you got to enjoy them for a while.

What I can recommend is that you try a mini-makeover for your house before selling. Most of the items on this mini-makeover list are relatively cheap and can make a big difference in the impression that the house gives to visitors.

Outside:

Get the exterior and any decks or patios and driveway cleaned. Most often this will involve a power washing. Once you’ve got the dirt off, look to see if any paint needs touching up, especially on the trim. Don’t forget the garage, if it is detached. A new seal-coat on the drive will make it look good, too.

Check the windows all the way around for any torn screens, cracked storm windows or loose and misaligned shutters and fix those problems.

Trim back the landscaping. People often let trees and bushes go for years (decades) without proper trimming and it gives the place an “overgrown” look. Remember that people will be waling up to your front door, not coming in the garage as you most often do (see my post of August 22), so fix anything there that doesn't look right.

Check your garage door for rust at the bottom and a torn or missing bottom seal and fix those issues - repaint as needed.

Interior:

Paint or wallpaper. Nothings spruces up a room like a fresh coat of paint, and don’t forget the ceiling. You can even use embossed wallpaper and create a tin ceiling effect or get real tin ceilings (a bit more expensive). Wallpaper is making a comeback of sorts, but I still don’t recommend that you use very much in the house and make sure that it color coordinates with adjacent areas or rooms and is not jarringly different. And don’t, don’t, DON’T paint directly over paneling, even if it is the old dark type. There are wall papers that you can get to put over the paneling that will hide the lines in the paneling and allow painting.

Put in new faucets. Look at both the baths and the kitchen and maybe update to the newer faucet finishes. Bright brass is out and the newer brushed nickel finishes are in.

Put new switch plates and outlet covers on. This small change can do wonders for a room. Switch plates in particular get dirty and leave the wrong impression with visitors.

Put in shelving in rooms like the family room, the laundry room and bedrooms. Relatively inexpensive and easy to hang designer shelving can add a touch of class to an otherwise plain room and it can increase the utility of laundry rooms.

A simple touch that adds class is to change to new lampshades and/or use the lamp shade embellishments that you’ll see in decorator homes – fringes or natural twigs and dried flowers. You should be able to find those at crafts stores.

Replace the knobs and pulls on kitchen and bath cabinets. In many cases the cabinets perhaps didn’t have pulls or knobs, so add them. You can also add class to a kitchen with under cabinet lighting.

A new bathroom mirror can spruce up that space, perhaps on a new medicine cabinet.

If you are fairly handy and have the tools to work with, you could try replacing the back splash in your kitchen with a tile back splash. Whatever you do, resist the urge to paint over an existing tile back splash or over tile in the bathrooms. If you are not that handy, hire this job out (see my post of July 1 about handyman homeowners). even just cleaning or re-grouting the tile in baths can make them look fresh.

So there are some mini-makeover ideas (and some cautions). You could probably do this entire list of makeovers for less than the cost of 2-3 cabinets in a kitchen remodeling project.

Monday, October 8, 2007

Get an inspection on new-builds


I read an article today in one of my real estate news sources about getting inspections on new-build homes. That's a really good idea. Many new-home buyers spend quite a bit of time with the builder, picking out colors or cabinets or light fixtures or whatever; but, some just wander in after a builder spec-home is built and decide to buy it. Either way the typical home buyer is not qualified to inspect the workmanship and materials him/herself.

The builder will tell you that the new-build home is inspected as it is built by local building inspectors and that they would catch any problems. That's just not necessarilly true. Typically, local building inspectors are looking for infractions of the local building codes and may not even look at many areas that could involve, or lead to, other issues. In many areas they are also overworked and may do just cursory inspections; although, that is less the case in the current building slump.

The American Society of Home Inspectors (ASHI - one of several professional organizations for home inspectors; two others are NACHI and NAHI - you can google any of them to get to their Web sites) recommends a three-pronged inspection: prior to the pouring of the foundation, prior to insulation and drywall, and finally prior to the final walk-through. You should ask 2-3 home inspectors in your area to tell you about their experience and ability to do a new-build home inspection and what they will be looking for in those inspections.

You should tell the developer/builder that you want the right to have an inspector of your choice -- and at your expense -- to conduct these three inspections. The sales contract you sign should spell this out in clear terms. Expect heavy push-back from the builder and be ready to stand firm on this request. Builders typically don't like to have home inspectors looking over their shoulders during the build. Many builders consider home inspectors to be unqualified nuisances; however, smart developers and builders will realize that catching a problem early can actually save them money later.

Builders typically provide a "home warranty" with the sale of the new-build home. These warranties typically cover the materials and workmanship on the home for one or more years. The builder will point to this warranty as one reason that the buyer shouldn't get an inspection - after all any issues are likely covered by the warranty. While that's true, it is also true that it is a much bigger hassle to get issues resolved after you've moved into the home, especially if the problem is in one of the major systems in the house and may involve opening the walls again.

There is also the chance that a very real issue with the build won't even be noticed by the first owner and will only come up when he/she tried to sell, sometimes years later. Once the builder's home warranty expires there is little the home owner can do to get issues resolved by the builder. So, if a home inspector of your buyer's choice comes in on the sale of the house and finds issues that should have been resolved by the builder under the warranty, you are usually left holding the bag.

The amazing thing is that buyers often spend much more time inspecting and "kicking the tires" of a new car that they might be purchasing than they spend on the largest single purchase that they will ever make - a new home. Buyers get caught up in the emotions of the moment (see my post of 2 days ago) and maybe the choices that they have to make for the house and forget their responsibility for due diligence in the build process. That's especially easy to do, if the developer/builder is a friendly, seemingly trustworthy type, who keeps assuring you that he'll make everything right if there are any issues. How will you know if there's something that needs to be fixed? Get it inspected as it is built and you will feel better about it when it's done; even, if you don't end up making a friend out of the developer/builder.

Sunday, October 7, 2007

Yea! We're not #1!



A recent story on CNN's Money Web site used a set of predictions that have been created by Moody's (see whole story) on the coming declines in the values of homes in major market areas. The table lists the top 100 U.S. markets and the projected declines. Most of the predicted declines are yet to come, with Q3, 2008 as the projected "bottom" of this declining market. The list below shows only the top ten, plus the other market areas in Michigan that were on the top 100 list - some are groupings of cities in the area.

#1...Stockton, CA.....................................................-25.0

#2...Palm Bay-Melbourne-Titusville,FL..............-24.9

#3...Sarasota-Bradenton-Venice,FL.....................-24.8

#4...Reno-Sparks,NV..............................................-22.4

#5... Modesto, CA.................................................... -22.3

#6...Detroit-Livonia-Dearborn MI........................-21.3

#7...Fresno CA......................................................... -20.0

#8...Oxnard-Thousand Oaks-Ventura, CA.......... -19.2
#9...Sacramento--Arden-Arcade--Roseville CA..-19.1

#10.Las Vegas-Paradise, NV.................................. -18.7

#18.Lansing/East Lansing, MI............................... -15.7

#20.Warren/Farmington Hills, Troy, MI............. -15.4

#37.Flint, MI ............................................................ -11.3

#67 Grand Rapids/Wyoming, MI.......................... -5.3

California, as expected, had the most entries on the top 100 list, followed by Florida (also expected). Michigan tied with Ohio for Mid-west honors (if it can be called that); although Ohio cheated by having two area that it shares across borders with neighboring states - Youngstown and Cincinnati.


If the area that you live in is not named here, that's just because it isn't large enough in population to make the top 100 list, not because it is somehow magically going to avoid this decline. If you're in the Detroit metro area of influence - Wayne, Oakland, Macomb, Washtenaw and Livingston Counties - you are in a declining value market, likely in the -13 to -15% range. We may bottom out sooner here, since much of that decline has already shown up in pricing here, but it will still likely be early Q3 of 2008 before we start back from the bottom of this market.


These projections mean that we've got more price pressure to come; and, the sooner sellers accept that fact and deal with it in their pricing, the sooner we can get rid of some of the overhang of inventory on the market. Buyers can expect to continue to see great deals, well into next year; but buyers need to be ready to make decisions, instead of trying to wait for the "bottom" of the market. Market-timing in real estate is as much a fools game as it is in the stock market. You don't want to end up with a bad case of the "coulda, woulda, shoulda's", just because you waited too long for a better deal on the house that you wanted.

Saturday, October 6, 2007

Keeping a level head in real estate transactions


I read an article in Business Week this week about a new book out, titled "The Little Book That Makes You Rich" by Louis Navellier. Navellier is a Wall Street “quant”, one of the Wall Street advisers and money managers who believes in and practices the science/art of quantitative analysis of the stock market. There were some important tips in the article and I’m sure the book has many more, but the gist of the article and the book is that emotion needs to be kept out of investing in stocks – you need to look at the numbers and learn how to read the trends that are in them. One little phrase seemed particularly insightful – “You can show love to stocks, but stocks can’t love you back.”

As a Realtor, I found much to apply to the home buying and selling processes in Navellier’s advice. You can also love houses, but houses really can’t love you back. We have a saying in real estate that you buy a home, but you sell a house. The difference is the love that you have for the dwelling, which is all in your own mind or memories. When house-hunting some people tend to “fall in love” with specific houses, mainly because some features of the house have kicked off a strong “nesting” reaction that has taken the building out of the realm of being a house and made it somehow your home.

The people who do house staging try to find ways to stimulate that "fall in love" reaction to the house. It may be some piece of furniture – a particularly cute crib in “the baby’s room” – or even the ways that the colors work together with the carpets in a room. I've seen guys fall in love with a particularly well done garage or basement workshop. Home stagers are good at using those emotions; but, should you buy a house because of this emotional reaction to something that is actually fleeting or may even be gone, once you get there (remember that stagers bring in things that are not a part of the house).

I guess I’d be called a quant if I were in the stock market game instead of real estate. On the sell-side of the process, I tend to analyze things using the numbers instead of the emotions that might be evoked by the place. I do a lot of statistical work when getting ready to list a house to try to show the owners where their house will fit into the market. The owners sometimes try very hard to convince me that their home is so much better and therefore worth so much more than other similar homes. They are still emotionally attached to the building as a home, which is understandable. Eventually, especially if it just sits on the market long enough at its inflated price, even the most emotionally attached homeowner will begin to see the house as a product that needs to be sold, so that they can move on with whatever plans they have. Sometimes that takes a few months, sometimes even longer.

It is harder on the buy-side of the process, since an emotional response to a particular house is most often the reason for buying. I view a part of my job as being the cooler-headed professional in the process; so, I’m the one cautioning that we need to look at all of the ugly stuff – plumbing, electrical, foundation, roof, etc. - and not just the cute crib in the nursery. Of course a thorough home inspection is a must and can end up in quite an emotional scene, when someone who is in love with a particular house has to let go of it because of major issues. I’ve had more than buyer break down into tears when they finally concluded that they just couldn’t go any further with a problem house that they loved.

Navellier sites all sorts of bad stock picking and stock ownership behaviors that are caused by the emotions that people let rule them in that process. People tend to sell winners off too early and stick with losers too long, according to his book. One observation that he has in the book is that “…the worst thing that can happen to a novice, unknowledgeable options trader is to make money on his first trade. This leads him to believe he actually knows what he’s doing, and large losses are sure to follow.” In real estate, one of the worst clients to try to deal with when working on the sell-side is the guy who starts out the relationship by telling you, “I sold my last house myself and sold it for full price in 2 weeks.” You just know that this is going to be a tough, maybe rocky, relationship with someone who likely doesn’t have a appreciation for the current market.

Navellier also says that stock market investors often fall victim to what famous investment guru Warren Buffet calls the “rear View mirror” effect looking back at what has happened in the past and expecting the future to be the same. Home sellers who reference a neighbors house selling a couple of years back for more than I’m currently suggesting as a market price for their house are falling victim to that effect. In the market today, looking back more than 2-3 months is worthless, last years appraisal for a refinance is meaningless and what your neighbor down the street got for his house is just one data point in the analysis. If you’ve decided to sell, get a professional Realtor involved and listen to his/her advice. It may also help to start packing up many of your personal items (that will also help de-clutter the place), especially family pictures and mementos that make the house your home. The home that you’ve lived in for years will always remain in your memories; but, the faster you can get to the point where you see it as a house that needs to be sold the better.

So, I walk a fine line between being the cool head who looks at each house as a product that must be thoroughly evaluated on all levels or becoming the Grinch who stole the happiness about finding (or selling) your perfect home. Personally, I'm aways happy for the buyer and/or seller once we have a deal that leaves both sides happy.

Friday, October 5, 2007

With tongue firmly in cheek...


I have long been a fan of the world's most prolific writer - Anon. You see his work everywhere and the breadth and volume of works attributed to him is quite amazing. Thus, I was more than just amused the other day when I “Googled” (now a verb in the vernacular) Anon. The scholarly dissertation written in 1983 by Donald E. Simanek at the end of this link (http://www.lhup.edu/~dsimanek/anon.htm) was one of the returns from that search. It it turned out a rich and full history of Anon, a man worthy of great respect. Mentioned in the dissertation is his contemporary Ibid; who, rightfully so, was dismissed as a hanger on to Anon and other great writers of the times. Another Anon contemporary Nobody later had a minor role in the comic strips as a character in the "Family Circus" strip. Anon has perhaps been attributed with more contributions to literature over the centuries that any other writer, as well as countless sayings.

A short excerpt from the above mentioned work on Anon's life –

“Few literary puzzles have inspired such universal apathy as the question: "Who was Anon?" Books of quotations are cluttered with sayings attributed to Anon, and these scraps of truth and wisdom have earned Anon universal recognition and immortality. Innumerable biographies have been written about lesser authors, even authors so obscure that their works are seldom read. But Anon, though widely read and widely quoted, has been accorded only widespread indifference by the literary community.

What little we know of Anon's life is of doubtful validity. We have no authentic picture of Anon, nor any first hand description of him by anyone who would admit to having known him. Not one scrap of original manuscript in his own hand has survived the ravages of time. Scholars have given up hope of ever discovering an autobiography of Anon in some dusty attic.

Yet, from the available dearth of evidence, we can piece together a sketch (albeit apocryphal) of this prolific genius. We know that Anon's wisdom appeared very early in history. When references to him are traced backward in time, in the general direction towards the emergence of civilization, they lead us to a blank wall. This suggests that Anon must be placed in historical times so ancient as to predate the emergence of intelligent thought. He was certainly ahead of his time, which may be the reason why none of his contemporaries knew of him.”


There is much more about Anon at the site referenced above with the link and I encourage you to visit it to get more insight into Anon the legend behind the myth.

I decided also to pursue information about another of the obscure contributors to the lexicon of our society and recalled one of the greats in sanitation history. Back when I was in the Army, I did a book report on the life and contributions of a great man, Thomas Crapper, whose biography “Flushed with Pride”.