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Friday, November 30, 2007

Dealing with people who just don't care...

I’m trying to do deals mostly on foreclosed houses right now, because that’s what all my buyers want. There are what appear to be good deals all over the place out there right now. I say “trying to do” because much of the time I have to deal with people who just don’t care – about the house, about the buyers or about the agents involved. Once a property goes to an “REO Asset Manager” it becomes nothing but a number, a statistic, something to be dealt with in an abstract sense. It has ceased to be a house (it ceased being a home some time back) and is now just a “case file,” with a number.

The people handling those case files are likely overworked and overwhelmed by the load these days; at least I imagine that they are, because that’s the only excuse I can think of for how surly and detached many of them (but not all) appear to be when dealing with the people trying to buy one of their assets. The other thing that I’ve noticed is that all of the rules of how a normal real estate transaction should happen go out the window. Each bank makes up it’s own rules and dictates those rules to anyone who might wish to buy the asset. Disclosures – “we don’t need no stinking disclosures”. Repairs – “we don’t make no stinking repairs.” Mold, water damage, frozen pipes, animal feces on the floor – “those are your problems not ours.” And, they all also have their own version of the Sergeant Schultz denial (see my post of September 22) of any knowledge about anything to do with the asset.

The worst part of trying to deal with these folks is that many aren’t professional in their behavior towards the other parties in the transaction, they’re just downright rude. They don’t return calls, they don’t return emails, they don’t do anything that isn’t in their own best interests and to their own timetable. Why? Because, they don’t have to. They aren’t regulated by anyone. They apparently don’t have any professional or ethical standards to uphold. They don’t seem to have anyone to answer to, except, maybe, some “management committee” somewhere, that is only looking at the numbers and not the behavior surrounding those numbers.

One by one, as I have to deal with these clowns, I’m making my own “case file.” There are banks, that I have to deal with now on foreclosed homes; that I will choose not to deal with later, when the market returns. There is never any excuse for the kinds of unprofessional and rude behavior that we’re experiencing right now and it will come back to haunt those banks that are not monitoring and managing their REO asset management people. Even in a foreclosure situation, the banks should watch to make sure that their asset managers aren’t damaging their reputations and images. The banks may say, "Yes, but those aren't really our employees; we just hire these companies to manage the sale of foreclosed properties." Well, just like a bad truck driver on the roadway; if your company's name is on the truck, you get the blame, whether you hired the truck driver or not. Banks and mortgage companies should consider that and do a better job of monitoring how their "assets" are being represented in the market. The bigger asset is your reputation in the market, so protect all your assets.

Thursday, November 29, 2007

What's your areas Drive Score?

There is a huge amount of irony attached to today's post. I reported back on August 2 about a site - http://www.walkscore.com- that will analyze any address and tell you what you can walk to from there and then assign a walkability score to that area. It's a nice way to find out something important about an area that you may be considering.

I suppose that it was inevitable that there is also a place that will give you a drive score for an area - both a rating and a list of business and other places that you can easily drive to from a specified address. That is a valuable service too, when considering a new location. The irony is that this mash-up site (it combines Google Maps with other code to give your the result) is sponsored by, and on a site, that is run for unrepresented sellers and is called fizber.com. the URL for the drive score application is drivescore.fizber.com.

Obviously the irony did not escape me, a full-time Realtor; however, you take it where you can find it and this appears to be an interesting application. I'm not sure just how good it is, but it's better than nothing and will give you some idea of what's around, if you aren't familiar with the area.

So go there to find out what yo can drive too and to the walkscore site to find out what you can walk to; and then, walk or drive to your nearest local Realtor (me if it's in the southeastern Michigan area) and ask them to help you find a home. If you are an unrepresented seller, use this service to find the nearest Realtor and get the help you need in this market.

Wednesday, November 28, 2007

Help is on the way?


Harumph, harumph, harumph! This mornings Detroit Free Press had a big headline - Foreclosure help on the way - that one might have taken to be a story about helping out those who are facing foreclosure. The story came out of the recent meeting in Detroit about the foreclosure mess that was attended by a bunch of US mayors. Reading the story, it quickly became obvious that these folks were focused upon how to help themselves as much as anything. The "help" that was mentioned in the headline was a proposed database service that would allow residents to find out who actually owns the foreclosed eyesore next door, so that they will stop bothering city employees with calls to find out to whom they should complain. How convenient and self-serving is that? Harumph!

Of course there was also a nod towards letting the foreclosed homeowner use this same database to find out who to try to deal with about the foreclosure and lots of harumphing about credit counseling and workouts, but little in the way of programs to restructure the bad loans that most people facing foreclosure have been victims of - ahhh, the old I'm the victim defense. Everyone seems to agree that the majority of foreclosures are being caused by poorly structured loans (mostly adjustable rate mortgages) that have now ballooned out of control and put the homeowners at risk of loosing their homes. There seems to be no consensus however in how to work this all out. Harumph.

We appear to still be in the finger pointing and find someone to blame stage of this crisis, with many still pointing to the greedy, or stupid, homeowners and saying that it is their fault that they borrowed 110% against their homes; so, let them default and wallow in their own mess. Others, of course, blame only the mortgage companies for offering such loans without any controls and little concern for the ability of the homeowners to pay later. Both views have some merit; but, neither argument does anything to resolve the current crisis. I can't believe that the homeowners want to default and lose their homes; nor, that the mortgage companies want to take over more foreclosed homes and sell them at a loss. If that is true, it seems to be a no-brainer that the two sides should work together to restructure these loans and keep the homeowners who are able to pay a reasonable mortgage in the homes. That's just not happening widely enough right now. Harumph, harumph.

Perhaps the federal government should let FEMA take over this crisis. They have lots of experience with housing. After all, those are the clowns who bought thousands of trailers for Hurricane Katrina victims and never delivered them and then sold them off at a huge loss. They also carted several truckloads of ice around the country for months while never figuring out how to get it to Katrina victims (eventually they let the ice melt into a pond that needed some additional water, thus performing a valuable public service). If we put FEMA in charge of repossessing foreclosed houses the victims of the foreclosures would never have to leave. In fact, they might even get a lifetime supply of ice. Of course the FEMA folks would have to work under the over all direction of HUD, so that President Bush could appear on TV and say, "you're doing a heck of job Alphoso," to the HUD Secretary.

So, help is on the way. Harumph! The mayors have figured out how to get out of the way of this mess, so they can go home, now. Watch for the new foreclosure database in your area. Then, you too can look up who the deadbeats in your neighborhood are and sit out on your front porch going, "Tut, tut", when they walk by pushing their belongings in a shopping cart. Hey, I didn't get a harumph from you over there.

Tuesday, November 27, 2007

Our little bit of vicarious fame

I live and work in the Village of Milford and I'm the Webmaster for the Milford Historical Society. One of Milford's claims to some amount of fame is that the stage, motion picture and TV actress Mary Jackson was born and raised in Milford. She appeared in countless films and in stage productions, but is likely best remembered for her recurring role as one of the Baldwin sisters in the TV show Walton's Mountain. As many may recall, the Baldwin sisters were the keepers of "Papa's Receipt - moonshine whiskey that they served to visitors and partook of themselves "for medicinal purposes."

Anyway, Mary never forgot here roots in Milford and returned almost every year to re-establish contacts with childhood friends and to just unwind from the Hollywood scene by getting back to her small town America roots. She eventually bought back the childhood home that she grew up in and restored it. When she passed away in 2006 she willed the home to the Milford Historical Society, which is working to preserve the home and open it to the public several times a year for events or special occasions. You can read all about Mary and her love for Milford at the MHS Web site.

The Historical society is holding the Mary Jackson house open on December 1, with all ticket proceeds going to the fund that supports the house. The house will be decorated in Victorian Christmas style and there will be musicians playing period music while you get a guided tour of the house. For more information go to the MHS site and click on the picture of the house on the left hand side of the opening page.

While you're visiting the Web site, check out the rest of the information about Milford's history and the Milford Historical Society. Milford's history also includes being a part of Henry Ford's Village Industries program and the MHS has worked to preserve the last vestige of that program in the Village - the Pettibone Creek Powerhouse, which was built to generate power for a Ford Motor Company carburetor plant in Milford. The powerhouse has been restored and is also open to the public on special occasions and during major events in the Village. Plans are underway to try to restore the ability to generate power from the water flowing through the Lower Mill Pond that the powerhouse is located upon.

Every little town and village across America likely has some history that would be interesting to share, The Milford Historical Society has made it it's mission to try to collect, preserve and share the history of Milford, Michigan. In addition to the Mary Jackson house and the Pettibone Creek Powerhouse, the MHS runs the Milford Historical Society Museum in downtown Milford, at the corner of Commerce and Union Streets. For more on that and all of the programs of the MHS, go to our Web site.

Monday, November 26, 2007

Declutter and help someone out...


There is an article in the Oakland Press this morning about the Furniture Bank of Southeastern Michigan and the programs that they run to help out people who need items of furniture for their homes. Like everything else, this charitable organization has been hit hard by the current economic downturn, with donations down and requests up dramatically. The Furniture Bank Executive Director, Collen Kelly, is a personal friend of ours.

I got to thinking, after reading the story, that this would be a great way for my real estate clients who are selling to de-clutter their houses. I almost always end up advising that and most people just don't know what they're going to do with the excess furniture that they may need, or want, to take out of their homes. I've advised getting a rental storage unit to some; but, if the truth be told, most of the excess stuff will end up being discarded anyway. Moves have a way of forcing the issue of cleaning out stuff that you really don't want or need anymore.

Well, the Furniture Bank and it's clients do need and want furniture in good condition, so you could end up getting rid of your excess and helping others out, too; not to mention possibly getting a tax break for your donation. The furniture Bank especially needs twin beds, dressers, dining room sets, refrigerators, stoves and cribs. The Furniture Bank will take smaller items, such as pots ands pan, dishes, silverware, glassware, lamps and household appliances in good condition and clean; however, you'll have to drop those items off at the Furniture Bank location at 333 N. Perry St in Pontiac; unless you also have one of the larger items mentioned above, at which time they will send out a truck to make the pickup. Twin beds, especially those "theme" beds like Spiderman or Cinderella beds become very expendable once your little Spiderman or Cinderella hit Middle School and no longer think they're as cool as they used to be.

So, as you get ready to put your house on the market, go though and identify items that can be removed to reduce clutter, or items that you're going to get rid of anyway and see if they are in good enough shape to donate to the Furniture Bank of Southeastern Michigan. Give them a call at (248)332-1300, if you have larger items that need to be picked up. If you do it now you'll still be able to take whatever tax deductions the might apply on this years taxes. Help the less fortunate with your excess and help me sell your house with less clutter.

Friday, November 23, 2007

I can only imagine...


There were pictures like this one in the paper this morning, of people who've been camped out in front of some of the area stores, so that they can be first in line for the "Black Friday" bargains. I've also heard stories about the "good ole days" in real estate when buyers were lined up for houses and there were multiple offers on houses just hours after they went on the market. I even read a story about it getting so crazy in some parts of California (where else!) that people were submitting the equivalent of resumes with their offers, in hopes of influencing the decision of the sellers.

I can only sit back and imagine a market like that - a seller's market. We have been effectively in a buyers market since I got into real estate 5 years ago. I got in after the 9-11 terrorist attacks and truthfully things in America have never been the same since that date. I mark it as the beginning of the current decline. Wars in Afghanistan and Iraq followed and the economy turned south after that date, especially in Michigan.

So, I've only ever known a buyers market, so far as real estate goes. It's gotten a lot crazier this year, with the meltdown of the sub-prime lending market. We are currently in an "anything goes" market, with no offer being too crazy to present and banks dumping foreclosed houses for pennies on the dollar. The buyers have become conditioned to this market and are now a lot more aggressive than ever with low-ball offers. I'm still surprised, though no longer shocked, at some of the offers that the banks are accepting.

The real estate market beginning to feel a little like the furniture market. You've seen the TV pitches, "no money down, no interest and no payments for two full years and we pay your sales tax." Maybe we'll see homes advertised with "no money down, we'll pay your closing costs and no house payments for the first year." That sounds crazy, but don't think it can't happen.

Thursday, November 22, 2007

Lots to be thankful for...


As I paused this morning to think about a blog entry, it hit me that I should just take the time to recount the things that I have to be thankful for on this day of thanksgiving. I have my health and a wonderful wife and family - two kids, each with great spouses, and four happy and healthy grandchildren. I have a faith that sustains me through the tough times and rewards me in the good times. I live in a beautiful old historic home in a marvelous little village that is right out of a Norman Rockwell painting. I work in a business where I get to help people realize their dream of owning a home (or selling a house) and I can work at my own pace. I'm Webmaster for my church, for the Milford Historical Society and for two of my own real estate sites, so I have lots to keep me occupied, in addition to work - I'm seldom bored.

Sure there are things that I wish could be better - the local and state economy for one; but, all-in-all there is still more to be thankful for than things to to grouse about. Later today, I'll be stuffed with turkey and all of the fixings, courtesy this year of my daughter; and I'll have had some quality time with two of my grandchildren. What more could a grandpa want?

So, I'm very thankful on this day, and most days, for what God has given me. I hope that those who may read this blog have similar things to be thankful for and will take the time to reflect on them and perhaps say a private little prayer of thanksgiving.

Wednesday, November 21, 2007

The Digital Kitchen


A survey earlier this year by a home builders association found (not surprisingly) that Americans consider their kitchens to be the nerve center of their homes; and, as such, they have some good ideas about how they want them to be digitally equipped.

The primary things that they asked for were -

* A digital calendar. The primary kitchen user, typically is also the primary schedule keeper and preferred a digital calendar over 22 other concepts. The calendar should be on a large screen used to add appointments and post notes all household members can access in the kitchen or remotely via the Internet.

* A recipe projection system. Lose those food-stained recipe cards and books. Eighty percent of those surveyed want some sort of wireless, voice-activated recipe projection system that would display recipes onto a kitchen surface.

* An energy monitor and control. Home owners want to monitor energy consumption by room and appliance to chart peak energy usage times, to diagnose areas of wasted energy, and to calculate energy costs.

* A home control station. Perhaps the appointment screen could also double as a monitor for the HVAC and security systems. Home owners requested a screen where they can view the temperature inside and outside of their home, adjust the thermostat on a touch pad and view live video of both the front and back of their house.

* A universal charging station. What better place than the social kitchen to juice up cell phones, personal digital assistants, iPods and the like. One-third of households reported that they currently keep their cell phones on the kitchen counter and one-half said they keep their phone chargers there as well.

* Wireless Internet access. Twenty-nine percent of all homeowners and 43 percent of those remodeling their homes want the Internet served up in the kitchen for Web surfing and email but not for offline applications.

The vast majority of home owners, 85 percent, said they don't watch videos or movies in the kitchen. Likewise, video games have no place in the kitchen for 93 percent of those polled. Most say just stick to a television and wireless broadband. Most parents, 59 percent, would rather kids not do home work in the kitchen. However, 48 percent said their kids do crack the books while the household chef is cracking eggs - perhaps to have their "information resource" close at hand. Likewise, 69 percent would prefer their kids not do arts and crafts in the kitchen, while 43 percent allow their kids to get creative on paper in the kitchen - there's no better way to add some authenticity to a report on Michelangelo work on the Sistine Chapel than to have some Italian tomato sauce spilled on one corner.

I seldom see kitchens in this area that have more than a cursory bow towards any of these ideas. Most still just have a little desk, albeit with a granite top in the higher-end homes, off to one side of the kitchen where mom can supposedly set up her computer. Are we behind the times again?

Tuesday, November 20, 2007

Drought affects move choices


There's finally a "bad list" that we're not on in Michigan. It has to do with areas that are considered drought risks. We've already seen on the national news what drought has done in George, Alabama and Louisiana; where water supplies are drying up and the states are fighting over water rights. There are other areas that have been under drought conditions for several years, too, and others considered at risk for drought. The riskiest places in the US are Los Angeles-Long Beach-Santa Ana, CA; San Diego-Carlsbad-San Marcos, CA; Oxnard-Thousand Oaks-Ventura, CA; Riverside-San Bernardino-Ontario, CA; Salt Lake City, UT; Nashville-Davidson-Murfreesboro, TN; Chattanooga, TN-GA; Birmingham-Hoover, AL; Greenville, SC and Knoxville, TN; according to Bert Sperling's BestPlaces.net. To see how drought prone your area might be, there is another net site - DroughtScore.com.

While we don't have to worry as much about running out of water locally, there is concern that the Great Lakes levels are dropping. we've been in a drought of our own in Michigan and this past year was officially declared a drought disaster in all of the counties of the lower peninsula in Michigan; so, farmers are now eligible for disaster relief loans because of that. Some of these conditions are normal cycles that the country goes through from time to time; however, an increasing chorus of scientists is also blaming the severity and length of the current drought conditions on global climate change. Will someone please get Al Gore a glass of water; he looks a bit parched up there on the dais.

All of this is starting to have some affect on people's choices of where to move. Given a choice, why move to a state or area that is a drought or is running out of water? More and more people are just saying no. Of course, it's kind of hard to say no to a new job in one of these hard hit areas, but one should at least consider that in the "quality of life" criteria when assessing job offers. I think the same is true of a decision to move into a flood prone area or one that get destroyed by fires or earthquakes every few years, but that's just me. maybe the people who live in some of those places are wealthy enough to be able to drink and bath in bottled water.

Monday, November 19, 2007

Forget About It...

One aspect of the current market, which may have an unintended positive side effect, is that some sellers are getting so frustrated with the market that they are taking their houses off the market. These folks haven't given up wanting to sell, they've just lost the will to persevere (see my posting of August 14 on the 3-P's of Real Estate) through the current market.

It's not easy to be patient with the market, but it's even harder for some to persevere, which has connotations of keeping the house ready to show and putting up with short-fused requests to leave, so that the house can be shown. Many sellers get tired of that routine and just say the heck with it. Some rationalize their move by stating that they are just taking the house off for the winter, which is a tougher time to sell.

It is especially hard right now; because, so much of the competition in the market is from foreclosed houses and the pricing pressure that those houses bring onto the market is just ridiculous. So, many sellers have wandered away, mumbling to themselves about waiting out the market. That is likely to be a 2-3 year wait, at least until the market corrects and gets back to a more balanced level. The unintended consequence of these sellers wandering off is that they are actually helping to make that market correction by reducing the inventory a bit.

Of course, many people who are on the market right now don't have the luxury of waiting - either job moves or loss of jobs force many to sell no matter what the market is doing. For those folks, the third "P" in real estate - price - will likely be the determining factor on how long it takes, even if it means bringing money to the closing.

As with most answers that are on the extremes of any set of solutions, taking the house off the market is not the best answer. Winter is a time when the tire-kickers stay home and the people who do show up to see the house are normally serious buyers. I have seen a slight pickup in the number of serious buyers who are out looking for mid-range ($250-450K), move-up (or downsize) houses lately; so, I'm encouraged that at least a few people have enough confidence in their jobs and the future to get on with life. If your home is on the market, I'll show it. If not, oh well. You can't sell it, if it's not for sale.

Sunday, November 18, 2007

Happy first-time buyers...

Perhaps the happiest buyers that I’ve worked with lately are the first-time buyers who waited until now to get into the market. They are finding such unbelievable bargains that many are ending up in homes that would have been their first move-up home a few years ago. One has only to look at what you can buy these days for $100-150,000 to see what is making these people so happy. Homes that would have been $180-200K (maybe more) a year ago are selling at that level now, albeit mostly as foreclosures. Some need repairs or lots of remodeling/redecorating; but, that doesn’t seem to scare off most of these buyers.

Of course anyone coming into the state from almost anywhere else is finding Michigan to be a great place to buy a house, too. That’s all relative, I suppose; since, even with our currently depressed prices, Michigan housing is still higher than many of its Mid-West neighbors. What still shocks most of these people are the high taxes on many of the homes that they look at here. The assessed values have not tracked the prices down yet and many of the foreclosed homes are now taxed at non-homestead rates; so buyers will get hosed for the extra taxes until they can get the homestead tax break and maybe fight with the local assessors over the taxable value.

The few people around who feel secure in their jobs and are ready for a move up the home ownership ladder are also happy with how much house they can get these days for a relatively small increment in their monthly payment. Of course they still have the issue of how to get rid of their current houses, so maybe that’s a wash.

So, amidst the doom and gloom of the market there are people walking around with big grins on their faces, because they just bought the house of their dreams for much less than they thought it would cost. Let’s hope that they can hold on to those homes for the 3-4 years it will take to make sure that they break even on a future sale; otherwise, they will join the frowny faces on the sell-side of our business.

Saturday, November 17, 2007

Foreclosure glut...


The more time that I spend showing buyers foreclosed homes, the more that I’m beginning to see that there is a glut of foreclosed houses on the market. By that I don’t mean just that there are a lot, we all knew that; but that there are more than there are buyers – at any price. I suspect that is because a lot of speculators who were buying up the earlier foreclosures are tapped out, so they aren’t snapping up everything that banks price to dump.

A second issue may be that a lot of the foreclosures that are now on the market or coming on the market are in fair rough shape. About one in 3 that I go visit with clients would need significant work before one could even move in. That’s just not appealing to most non-investor buyers and the investors that are left are trying to cherry pick at this point.

So maybe we not only have a glut of regular homes on the market; but, also a glut of foreclosed homes. What a mess! This glut just adds to the problem that I reported in this blog three days ago about too many choices facing buyers. Now they have to see all of the repos and the regular homes before making a decision.

I don’t know how long it will take the market to correct this problem. There is a second big wave of foreclosures just starting to come on the market that was caused by the big ARM resets of late this year. Many of those won’t get to Sheriff’s Sale until later this year or early next and then they have to go through the 6-month redemption period, so it may be May of June before many of them even hit the market. The end is not near.

I suppose that for buyers this is a good problem, giving them many more bargains to look at; but, for sellers this is just more unfair competition in the market and continued downward pricing pressure. As for me, it’s just more cold, dark (and sometimes very nasty) houses to go look at with buyers. I keep my flashlight in the car all the time these days.

Friday, November 16, 2007

Pricing houses in a crazy market


It’s getting tougher and tougher to put a price on a house that someone may want to sell. The problem is that so few houses have sold this year in many areas that finding valid “comps” is difficult. I was just out on a visit yesterday to a really nice old farm house in the area that the owner would like to sell. He’s done a fantastic job of fixing it up and it is worth a lot more know that when he bought it. The issue for me is that is has been more than a year since anything like it has sold within an area that includes his township and townships on either side. I just can’t find any comps to use in my analysis. To make matters worse, I just know that this house would likely have sold for at least $30-40K more just a year ago, and will likely be back at that level as soon as the market adjusts to a more normal state. If this seller had the option, I’d be darn tempted to tell him to hold on to it until the market recovers; but, he does not have that option – job transfer.

So, what to do to price this house? I’m having to use comps that are not exact matches and comps that are much further away than I’d like and I’m having to take a SWAG (you all know what that means) at what the current market impact is on what otherwise would be a good price for a nice home like this. We’ve already had the conversation about trading money for time and the discussion of the current market conditions. Fortunately, most sellers these days have been pummeled with so much bad news about real estate in the press that they are much more realistic about things. Still, it’s tough to accept that you put a ton of money into fixing up a place and how you’re not going to get very much of it back.

I was at a similar meeting the night before and in that case another job transfer is going to result in the seller being considerably upside-down (owes more than he can get for it) on his house. His was a really tough situation, since comps were no problem (over 20 houses for sale just in his sub); but, the comps led to the conclusion that his house is worth less than it is mortgaged for right now. That seller has accepted that fact and is ready to move on with life. The secondary impact of that is that his family will likely have to live in a rental on the other end while he rebuilds enough savings to afford to buy another house.

It’s not a fun position to be in to have to tell an owner that they have to bring money to the table to sell their house or that they won’t make back what they’ve put into their home. It’s just as bad to have to tell an elderly couple that the retirement nest egg that they were counting on from their investment in a house is going to hatch an ugly duckling and not the beautiful swan they had hoped for. At least the job has been made a bit easier (though no less troubling) by all of the media coverage of the current house value meltdown. Just remember – “Don’t shoot the messenger.” I’m really trying to work for you when you sell; but, I have to work within the confines of the current market.

Thursday, November 15, 2007

Collateral damage...


Collateral damage is a quaint term often used by the military or by national security people to classify the deaths of innocent bystanders that is caused by some overt action like bombing a suspected terrorist. We get to see the body of the dead terrorist on the local news, but the pile of dead bystanders is just collateral damage and doesn’t get much press coverage (unless the local government people raise a stink); then the media trot out pictures of some poor kid, all bandaged up in a hospital room.

In the current real estate meltdown, we see stories quite often of some poor unfortunate family losing their home to foreclosure or we hear the laments of the home sellers who can’t sell their houses. The collateral damage that isn’t shown are the thousands of real estate professionals who’ve been forced out of the business or who are barely making it on drastically reduced incomes or the small, local builders who are struggling to avoid bankruptcy and keep their small businesses alive. In our area that translates to 8 out of 9 local new-build developments being on hold. It ripples out from there, of course. Who knows how many building supply companies have had to lay off people because of the bust in new construction caused by this downturn? Locally we’ve seen many mortgage companies and lots of title companies shut their doors or severely cut back. I could go on.

The point is that an awful lot of people are dependent upon the housing market and all of them are suffering because of the downturn. The BBC recently did an article on that aspect of the current market and I found that interesting. We don’t see much about that in our U.S. media, but the BBC is doing it as a human interest story in a foreign country, much as our media might cover the impact of immigration on the British society. Obviously, I could read it and relate to the travails of the Realtor who was spotlighted in the story. We’ve all had to adjust to this market.

As for me, I’ve already reported (see my post of Sep 13- Repo Man), I’ve taken on more buyer clients than I would normally have. My business used to be primarily listing homes, but now it’s fairly well balanced between listings and buyers. Most of those buyers are asking me to find them bank repos to look at, so I’ve been in a lot of cold, dark houses lately. Most bank repo houses don’t have water, gas or power, so we have to try to get in before dark, which comes earlier and earlier these days. Somehow these houses always feel about 10-15 degrees cooler than it is outside, too; so, it’s bundle up time. But, hey; at least I’m out working. I’m not in the collateral damage pile, yet.

Wednesday, November 14, 2007

Too Many Choices


The glut of houses on the market currently has had a secondary negative affect - it provides too many choices. I've been involved with quite a few buyers this year and almost all of them are overwhelmed by the amount of homes that are on the market and the human nature tendency to try to see them all before making a choice. I try to advise buyers to do more homework before we go out and to even do drive-bys to check out the houses and the neighborhoods before we start making appointments; however, there seems to be a strong "shopper's" desire to see them all.

Home buyers seem to be afraid that they'll somehow miss the "perfect house" for them, if they don't look at everything on the market. That has led to prolonged house hunting times and delayed decision making. It's not unusual for home shoppers to have to renew their mortgage pre-approval several times before actually using it to buy a house, since the "rate lock" on a pre-approval is normally only good for 30-60 days.

I also try to get home shoppers to take the time to make a list of the things that are really important to them. See my Web site http://www.themilfordteam.com/ under the FAQ Sectiojn for Buyers for a good home shopping list and advice on how to prioritize that list. The worst case scenario from a Realtor's perspective is the home shopper who tells you up front. "Oh, I'll know it when I see it." That means they have no idea (or can't figure out how to verbalize what ideas they may have) about what they want in a home. That's the start of a long, although not always satisfactory relationship. It's worth the time to sit with your Realtor, before you spend too much time wandering around looking at houses and let him/her help you figure out what you really are looking for in a new home; otherwise your head will end up spinning with the co-mingled details of too many house.

Tuesday, November 13, 2007

Putting a value on your home


One of the more difficult things to do these days is getting the right value (price) on homes that are going on the market. Even appraisers are having some difficulty getting value right. A part of the problem is caused by the slow turn-over in the market. It may be hard to find a comparable home that has sold within a reasonable period of time and close to the home in question. Realtors and appraisers like to find "comps" within a mile or two, preferably in the same neighborhood or sub. Obviously finding some sold homes that are almost exactly like the one in question is the best case scenario; however, even that case goes out the window if more than 3-4 months have passed since the sales. The market has been too dynamic (unfortunately in a downward direction) to use comps that more than 1-2 months old.

So, I depend quite a bit on statistics to help me guide sellers. If I can find comparable houses, that's great; otherwise, I look at what has sold in the last 2-3 months (6 months at the outside), even if not exactly comparable, and then calculate what people have been paying on a cost per square foot basis in the area of interest. It's a pretty good bet that if the area average is $100/Sq Ft that putting a house on the market in the same area for $150/Sq Ft is going to be a tough sell.

Now, it's certainly possible that the owners have put the upgrades and updates into the house to justify trying to get the price uplift; however, many times it ends up that owners just can't get back what they think they should for a place, because the surrounding neighborhood just doesn't justify the premium. I've seen that quite often lately with house-flippers (people who buy houses in need of repair/updating, do the work quickly and then try to sell them). Many house-flippers have been badly burned by the cu rent market and some have even slipped into foreclosure on properties that they were sure that they could flip with a few updates. It's actually not good to be the most expensive home in your neighborhood.

If you're considering selling within the next 6 months, it would be a good idea to call a good Realtor (and you already know one from reading this blog) and having him/her come in and give you an analysis of the current value of your home and make suggestions about what you could do to improve it and get it ready for the market.

Monday, November 12, 2007

Tapping in to your best investment


One of the real estate news sources that I regularly read had two articles today about home values. One was titled “Real Estate Continues to be THE best Long Term Investment” and the other “Home Owners Still “Cashing Out” Billions of Equity Via Refis”. The juxtaposition of those two articles in this news feed sort of sums up a good part of the mentality that led to the financial mess that we’re in right now in real estate.

I certainly buy into the first story that real estate is a great investment. The author made the case very convincingly that, even in downturns like we are in, with falling values in the short term; property values are still up over the long term. He also notes that a large portion of what dictates the inherent value of a house is the replacement cost to rebuild it and that is not likely to go down over time.

The second article documented the rise in the use of refinancing of homes to pull equity out as a means of sustaining a lifestyle. The author found that 87% of refi’s today involved extraction of equity verses only 33% in 2003. It would certainly be foolhardy to think that all of that equity is being extracted to cover the cost of updates to the house, which would at least add some value. Today, much of the money taken out in refi’s is used to cover the Visa bill or to pay off other debts that we keep ringing up.

While it is not necessarily bad to tap your home piggy bank for some equity to cover an emergency need, it is the pattern of doing so regularly that got many home owners into trouble, when home values went down. If you’ve always been hovering around the 100% financed mark on your home, it doesn’t take much of a drop in values to put you upside down on the house. Then when you go to that well for another drink of equity, you discover that it is not only dry, but that you owe more than the house is worth.

If refi’s have become the only way that you can sustain a lifestyle, then you are in trouble. That habit likely contributed greatly to the current foreclosure rate that we are seeing. So the caution is to use the equity in your home wisely. Left alone, it will turn out to be a great investment, but tapped too often, it can become a powerful narcotic that can get you into trouble.

Sunday, November 11, 2007

Foreclosues impact on neighborhoods


I showed yet another foreclosed house last night and got to thinking about the impact that all of these foreclosures are having on the communities and neighborhoods in which they are located. I did a little research (read that as I "Googled" it). There are some good studies on this issue already. One is called "There goes the Neighborhood" and is worth a read. Another is by ACORN (Assoc for COmmunity Reform Now) is a good study of the impact of foreclosures on communities and the services that they offer.

I guess that I had always focused upon thoughts about the people who used to own the home and less about the impact on the surrounding community. Foreclosures rates like we are seeing now (in some areas as much as 1 in 10 homeowners are losing their homes) definitely will mean lower tax collection for the local governments and thus lower ability to offer normal services. Foreclosures have already driven down property values in most areas and they will eventually translate to lower tax collections, too.

What I experience quite often, when I take people into these foreclosed homes, is that the place has been vandalized, either by the former owners or by someone breaking in after the house has been abandoned. That adds to the difficulty of selling the place and further lowers the value. I have been in a few that seem to be contributing to neighborhood crime increases (drug houses), as well as being vandalized.

So, this foreclosure problem is bigger that just saying "Oh, poor them, they lost their house;" it really is "There goes the neighborhood," and we need to do something about it before it drags us all down. I've seen a couple of neighborhoods where the Home Owners Association (HOA) has taken actions to insure that foreclosed houses don't become eyesores - mowing grass, picking up fallen limbs and the such - but even they can't do all that is necessary, like keeping the house painted or replacing broken glass, because of legal and liability issues. Still, it's a start to getting the community involved in fighting back against foreclosure blight.

Friday, November 9, 2007

Meeting in the middle

I recently had a deal that didn’t go through, which happens more that any of us would like lately. I have a house listed at what I think is a fair price and a seller who is willing to negotiate a bit, but is still in that “I won’t give he place away’ mode. So, we get an offer and it is one of those low-ball offers that all too many buyer agents are talking their clients into making, just to see if they can steal the house from a desperate seller.

This offer had 6% of sellers concessions baked into it; in addition to a offer price that was 10% below asking price. I guess that’s to be expected in the market that we’re in; at least the 90% offer price. Even the request for seller’s concessions isn’t all that rare, although the 6% level is a bit unusual because most lenders set the limit at 3%. This was apparently tied into some first-time buyer program.

So, anyway, we went back and forth several times and never could agree upon a landing price that made both parties happy. That is also not unusual these days. One argument that I got from the other side was that they had made the effort to meet us “half-way” and were disappointed that we would reject their final offer. As I did the calculations, they increased their offer by 1/3 of the difference and dropped the requested concessions to 3%, which my client just didn’t see as meeting us half-way and neither did I. If the house had been overpriced to begin with, perhaps a portion of the low offer might have been viewed as dealing with the difference between the asking price and the market price.
I try fairly hard to make sure that my listings are priced to the market; but, occasionally I’ll have an overpriced listing in my inventory, especially in the early days of the listing. I don’t feel bad about where we are on this listing.

What I think has happened in the market is that almost all buyers and buyer agents have become conditioned by foreclosures and other distressed properties to think that all sellers are desperate and will take whatever is offered. That is starting to discourage some sellers, many of whom are pulling their houses off the market (at least those who can afford to do so). That’s too bad and results in further skewing the market, since the remaining sellers many time are desperate or in distress.

It will all work itself out over time; but, in the mean time, regular sellers have to put up with aggressive buyers and low-ball offers. As I said in my August 31 posting on Greed in Real Estate, the process needs to result in a win-win situation, where both sides of the deal feel good about the transaction. Truly meeting half way may allow that to happen, but you need to start from the right points on both sides.

Thursday, November 8, 2007

Red flags can be good...


Recent studies indicate that identity theft is actually declining a bit; but, it is still a major problem. Several laws have been passed that try to deal with this issue, both to prevent it from happening in the first place or to deal with making it easier for the victims to recover their good credit.

Beginning Jan. 1, 2008, with all federally regulated financial institutions ordered to be in full compliance by Nov. 1, 2008, the so-called "Red Flag" provisions of the Fair and Accurate Credit Transactions Act of 2003 (FACTA), requires that financial institutions and creditors develop and deploy an Identity Theft Prevention Program for combating ID theft on new and existing accounts.
The Red Flag regulations are included in the same massive regulatory overhaul of the Fair Credit Reporting Act (FCRA) that gave consumers free credit reports and a host of additional protections.

Under Red Flag provisions, each institution must develop a program that will:

•Identify relevant patterns, practices, and specific forms of activity that are "red flags" signaling possible ID theft.

•Include a mechanism to detect red flags identified by the program.

•Quickly respond to detected red flags in a way to both prevent and mitigate ID theft.

•Be updated regularly to reflect changes in real world risks from ID theft.

I’ve actually experienced a form of “red flag” diligence within the last couple of years. Every time that I travel anywhere I start getting red flag interventions at gas stations restaurants, hotels and other places. My credit card companies know my normal patterns – staying around home for the most part; so, when they start seeing gas being purchased 1-2 states away from home, they get suspicious. Normally that takes the form of having to enter more information at the pump or at the check-out– information that only the real card holder might know. At first I was annoyed at this practice; but, then as I thought more about it, I was happy that they are looking at each transaction and trying to make sure that it’s me, and not some thief with my credit card in his/her hands.

I’ve actually had 2-3 intercepts of seemingly unknown credit card charges. A couple turned out to be valid, but were suspicious just because of the names of the company placing the charges. That can happen too – you charge something from a company with a name that you recognize and the credit card bill shows a completely different name. Many companies are really subsidiaries of large companies or use third party billing companies to collect credit card charges. The name changes can get confusing to the consumer, since most credit card bills don’t contain enough information for one to tell what it is that is being charged for on the bill. Perhaps that should also be included in the legislation that is being passed to deal with this issue. The credit card companies seem to do a good job of following up and investigating any suspicious charges that you challenge, but putting more information on the bill about what the charge is for would cut down on the number of false alarms that need to be investigated.

So, I say wave the red flags all you want, just keep the bad guys at bay.

Wednesday, November 7, 2007

Slowly going green...


Today I’m taking another small step to going green. I’m trading in my gas guzzling Cadillac for a thrifty Scion xB. I’m going from 15-18 MPG average to a little over 30 MPG. This was a big step for me in more ways than one. Aside from my MGB, this is the first foreign car that will have owned, since my college days ( I had a Triumph Spitfire for a while back then). I was stuck for many years with having to own either a GM or Ford, because I called upon those to companies when I was selling computers in the Detroit area. One just did not drive up to a GM plant in a foreign car.

Now, it is fairly clear that gas prices are going to stay at or above $3.00 per gallon for some time. It is also clear, especially from the fight that they are waging against higher mileage standards, that the domestic auto makers just don’t get it. They keep claiming that the American public just doesn’t want fuel efficient cars and trucks. Well this American car buyer has had it with under 20 MPG fuel efficiency. I put over 20,000 miles on my cars every years and the cost of fuel is killing me. So, I started looking for the most fuel efficient cars/tucks that I could afford. I add that last part because there are a few American made hybrids that I considered – the Ford escape or Mercury Mariner for example; but they are just too expensive for me right now. Maybe next time.

So, for now, it was a choice of several foreign made very fuel efficient cars. The Scion xB won out for several reasons. It is distinctive in its styling, it is very roomy inside ( I actually think it has about as much passenger leg room front and rear as my Cadillac), it has good space for my signs and stuff and it get 30 MPG city and 35 MPG on the highway – about twice what I have been getting. I’m not sure what “image” I’ll be projecting with this car. The Cadillac had a certain aura of success about it that I’m sure gave comfort to some; but, the Scion will likely give me a certain cachet with a younger audience. I’m not overly into that aspect of cars; but, as a real estate professional, I have to be at least aware that the car that you arrive in can have some impact on the impression that clients might get. Obviously, I risk offending some in the automotive industry locally, but I suspect that will be less than I might imagine.

So, here I go into the land of green. Actually this is step three for me in my fight to reduce my carbon footprint. I replaced my old, energy wasting, but historically correct, windows in my historic home last year. That didn‘t seem to offend anyone, maybe this move won’t either. I also replaced my old hot water heater with a new, high-efficiency unit this year. Wow, there’s no stopping me now.

Tuesday, November 6, 2007

Your carpets may make you sick


There are lots of potential health hazards in the typical home and you are likely standing on one as soon as you enter – the carpeting. More and more people are discovering that they are getting sick because of their carpets. I'm not sure whether this is another modern phenomena that portends a change in humans or the result of changes in the home environment caused by the manufacture, use and care of the carpeting, but here are the leading candidates for the reasons that your carpeting may be making you sick.

The carpet adhesives necessary to manufacture carpet may be a primary reason that some people react negatively to new carpeting. Those adhesives hold the carpet fibers together and attach the backing to the fiber layer. There may also be adhesives used to manufacture the carpet pad. It appears that some people become ill when exposed to these adhesives or actually to the gases that vent off from the adhesives. I’ve actually witnessed a chemically sensitive person become ill just by walking into a room with fresh carpeting. There also may be adhesives used to install certain types of carpet (normally the indoor-outdoor type), which can exacerbate the issues. If you are one of the people who is sensitive to these chemicals, you may be better off avoiding a room with newly installed carpeting until it is free of fumes from the adhesives. That can take quite a few weeks for new carpeting.

Carpeting tends to get very dirty. If you don't believe that, rent a carpet cleaning machine and look at the waste water, once you’re done cleaning. It will be black as coal. That dirt was in your house, in your carpet -- and you were touching it, breathing it and becoming dirty as a result of living with it. Mixed in with the dirt are all of the pet dander, germs and dust mites and other nasty things that lurk in your carpets. If you’ve ever stripped old carpeting off a floor, you know how much dirt is left under the carpeting and pad. Gross!

Everything that you and other family members (including pets) come into contact with ends up in your carpeting. So do particulates brought in with air pollution, as well as outdoor pollens. In short, your carpeting is a microcosm of your outdoor environment. If you have dust allergies or asthma, this might be reason alone for eliminating carpets. If you are going to keep them, make sure to vacuum them often, using a vacuum that actually works rather than redistributing dirt all over your house. The vacuum should have a good HEPA filter, as well as good suction. And change the bag often, so that it doesn’t become overfilled, clogged and ineffective.

The final problem with carpeting concerns cleaning it. Some people reportedly become ill when exposed to the chemicals used for cleaning carpets. Even the so-called stream carpet cleaning system use some chemicals in the water/steam mix. There have been numerous published scientific reports that have addressed this issue. If you are one of these sensitive persons, you should avoid being in situations where you have to breath the air/fumes of newly cleaned carpeting. Even carpets that have dried from the cleaning may have a dried chemical residue on them which can kick up as you walk across the carpet or if you happen to sit or lie on the carpet.

More and more, people are opting for wood floors, which are easier to keep clean and which don’t have the gassing and cleaning chemicals issues. It is ironic in most of the older homes that beautiful hardwood floors were immediately covered over with wall-to-wall carpets. Get rid of the carpet and get back to the beauty of wood (or laminate, which at least looks a lot like wood). Other flooring alternative include tile, linoleum (although that will introduce the adhesive issue again) and stone (marble is the most widely used) or perhaps stamped concrete (you can literally make your floors look like almost any material using the stamped concrete approach).

The important thing is to think about whether the carpeting in your house may be the culprit in the continuing saga of illnesses in your home. Your doctor should be able to do tests to determine if you are in fact being poisoned by your carpets.

Monday, November 5, 2007

Saved from ourselves, again...


I'm not sure which is the dumber of the solutions to the sub-prime home loan mess being considered in Congress right now - proposals to bail out of companies that got themselves in trouble with sub-prime loans or the "save us from ourselves" proposal to eliminate the Yield Spread Premiums (YSPs) on home loans. Congressman Barney Frank (pictured on the left) is leading the effort to save us from ourselves. About the only thing that is certain is that whatever solutions our geniuses in Congress come up with, it will cost us taxpayers money.

In the case of the proposed elimination of the YSPs, it will also severely impact the real estate market; by taking away one tool that the mortgage industry has at it's disposal to keep mortgage rates affordable. Maybe Congress will next get into dictating mortgage rates (or capping them), so that people can afford houses. Stranger things have occurred in my lifetime.

Mortgage companies use the difference ("Spread") between the wholesale cost of money to them and what they charge to consumers (often 1/4 to 1/2 %) as the way to generate most of their profits; or, in some cases, to cover the discount points needed to make the loan viable for the borrower. If the YSP is eliminated, then mortgage brokers will have to charge higher rates (called points most of the time) and fees (often called origination fees) to make the loans. After all, the mortgage brokers can't be expected to work for nothing.

If the YSPs are eliminated, then the fees that brokers will have to charge will be payable at the time of the loan and would have to come directly out of the pockets of the borrower; since, they can no longer be "baked in" to the loan itself (the YSP). The bottom line for many borrowers will be that they will not be able to afford to get the loans that they need, since they will not have sufficient funds to pay a down payment and the loan origination fees. So, the net effect of this noble effort by Congress to save us from ourselves may well be that fewer Americans will be able to afford to buy a house. Yea Congress! Keep up the good work.

You've got to admire this legislative body. It's the same group who brought you the 1-gallon per flush toilet and who dictated the sign on your lawn mower that read "Do not put your hand under the mower while the blade is turning." Maybe we should have a warning sign on our wallets that reads, "Do not open while Congress is in session."

Sunday, November 4, 2007

Woe are the local politicians


I saw an article in the paper today that discussed the affects of falling house values and the resulting lower tax revenues for local governments. For the first time in almost any one's memory, there is the possibility that taxes won't just keep going up and that local governments - Counties, Townships and Villages/Cities - might not get more this year than they did last year. Even mighty and wealthy Oakland County, Michigan has stated that the county revenues will be down next year, due to falling home prices and reduced revenues.

This is an unheard of thing and one that most of these government units have not planned for. All of these local governmental bodies are funded from the same well - property taxes. Government spending, on all levels, is based upon the premise that the well not only never runs dry, but that it flows more money into the coffers every year. That's why it's OK to make overly generous retirement benefits promises to current workers - there'll always be more tomorrow.

Now, with property values declining and the very real prospect that taxpayers will revolt if the local assessors keep raising the assessed values as if nothing has changed; local governments are faced with the need to deal with a new reality - the well may not have any more water to give. In my little corner of the world that recently translated into a road maintenance millage renewal being voted down. Of course, the initial reaction by the local politicians was to state that the taxpayers obviously didn't understand that they need the money; so, it will be put back on a future ballot and a better effort made to explain the tax increase. Perhaps the politicians don't understand that the tapped out taxpayers are just tired of seeing their taxes go up while their home values go down.

Perhaps the politicians need to figure out how to do a better job with what they have and spend less time trying to figure out how to get more. Now, local governmental entities aren't exactly hotbeds of corruption or waste; but, one has to believe that there are unexplored areas where cuts in spending can be made, better contracts negotiated, some projects or programs that can be cut back or promised benefits trimmed back. Local governments have always used the excuse that they had to offer better benefits, because they often paid less that the "prevailing wage" (a quaint leftover from the good times). Well, there are plenty of laid off workers wandering around now who wold welcome any wage; so, maybe they should look again at what they need to pay out in benefits.

So, I'll not cry for the local politicians. I suspect that they will find a way to keep giving themselves annual raises in pay and/or benefits even while they drive to work over pot-holed filled roads, past closed fire stations or police stations and empty parks and libraries. See my post of October 4th for the end game on this story.

Saturday, November 3, 2007

Tips for selling in winter


OK, so we’ve made it past Halloween and now we start to enter the winter months. In the northern states, that means that we’ll have snow soon (unless Al Gore is right and then we’ll have rain). What needs to change in the winter, if you have a house for sale?

Well, for one, you need to be prepared (or pay someone) to keep your drive and sidewalk and any stoops or porches cleared of snow and ice. Nothing turns the agent and the buyers off faster than having to slough through snow or brave an icy, slippery porch just to get in to see your house. So keep the snow and ice away! Prior to the snowfall be sure to have the leaves cleaned off your yard and steps and watch for falling limbs that can block a drive or make the place look unkempt.

Since visitors may have wet or snowy or muddy shoes, you should provide a rug just inside the door and maybe a chair or two to sit on while taking off and putting on shoes, if you request that they remove their shoes and/or boots. The rug (or better yet, rugs) that you provide should be big enough to hold several pairs of shoes.

Keep the house warm enough for visitors. If the house is unoccupied keep it in the 60’s instead of all the way down to the 50’s. A cold house is an uninviting house to visit.

If you have time before the visit, bake some bread or cookies or a pie, to fill the house with an inviting aroma. Winter houses stay shut up, so you need to pay attention to the smells that are shut in, too. A fragrant candle or two may also do the trick - one that emits pumpkin pie aroma is always good this time of year.

While it is tempting to just let the back deck or patio go for the winter, try to keep them cleared, too; so that a buyer can see what they look like.

If you have a gas fireplace you might want to start it before leaving for the showing, so that the buyers see the warm, inviting fire. Only do that with a natural fireplace if you have a glass enclosure to insure that no sparks jump out while you’re gone.

Interior rooms and the basements look especially dark in the winter months, so make sure that there are plenty of lights and that they are all on for the showing.

Make sure that the family hasn’t created an eyesore by crowding too many coats on the racks by the back door and the same with extra boots by the back door. Clean up the “mud room” before each visit.

Keep an eye on your garage floor during the winter. Cars tend to bring in a lot of mud and water (snow and ice) which can turn your garage floor into a quagmire for visitors and make the garage look very uninviting. A weekly sweep (or shovel) out of this mess will keep it looking ship-shape.

It’s really all about making the visit experience to your home as pleasant as possible for the buyers and that just takes a little extra attention to details in the winter months. Happy selling and good luck.

Friday, November 2, 2007

Your house as a retirement piggy bank


Many Americans have counted upon the appreciation of the value of their homes as a part (sometimes the major part) of their “retirement savings.” Now, all of a sudden that piggy is looking a bit scrawny. The recent market malaise has not only wiped out much of the value of this savings vehicle, but it has also left it locked into an asset that is not very liquid. It can take a couple of years to sell these days, especially at the mid and upper price ranges. This is causing more and more retirement-age people to delay retirement or forget about it altogether.

The mortgage industry has come up with the concept of a reverse mortgage, which allows the homeowner to take out their equity and not pay anything back until they die. There are some hefty fees involved, however; and, you still have the house to pay taxes on and maintain. A reverse mortgage isn't a perfect solution; but it can free up your equity to give you something to live on for a while in retirement. Still, selling out completely would be better.

At least one couple has come up with a unique approach to selling their house – they’ll give you your money back when they die. As reported in several news feeds, Bob and Ricki Husick came up with a really creative twist: Whoever buys their four-bedroom, 31/2-bath home on Fountain Hills Drive in Pine (near Pittsburgh) will get their money back after the Husicks die.

Not only that, but if the buyers are willing to provide care for the Husicks in their old age, they could also inherit the Husicks' retirement home in Arizona for a total estate now worth about $500,000. The couple has no heirs.

"Why not go for the works? So if we're worth $2.5 million, you get it all," said Mr. Husick, 55, a former Wachovia mortgage broker who would like to continue working after he and his wife move to Arizona.

"That's one way you get a built-in child or a built-in someone to care."
Of course, the value of the estate could erode, too, depending on the Husicks' fortunes and the cost of their long-term care. But Mr. Husick points out that he began saving for retirement at age 21, and he's willing to let the buyers write the will to ensure they inherit the Husicks' assets.

"We don't want you to think we're trying to trick you," he said. "You draw it up and we'll sign it."

If buyers prefer a more conventional arrangement, the Husicks are willing to sell their home, without any strings, for $399,900. The house, which the couple is selling themselves, has been on the market for 11 months.

Now there’s a novel idea. Instead of a reverse mortgage, which can be quite a bit less than the value of your house, because of the fees; offer a place in your will to whoever makes a full price offer to buy your home. Maybe it would appeal to the gambler in everybody.

While this all sounds a bit macabre, it is just part of a whole industry that is unfolding around the concept of cashing in on death. There is even a hedge fund that is backed by insurance policies that older people allow to be taken out on themselves. The elderly person is paid a lump sum up front, which they can use to fund their retirement, and he fund itself pays the premiums and collects the payout when the insured person dies. The fund is betting on collecting more that the total payout that it incurs and I’m sure employees several actuaries to calculate it’s odds on the pool of policies.

We do indeed live in strange times.

Thursday, November 1, 2007

Who's road is it, anyway?


A recent survey shows that many Americans believe that the nation doesn't need more roads to suburbia, just ones that are better maintained. Three-fourths of Americans surveyed believe that either being smarter about development or improving public transportation are both better long-term solutions for reducing traffic congestion than building new roads, according to a survey sponsored by the National Association of Realtors and Smart Growth America.

The 2007 Growth and Transportation Survey details what Americans think about how development affects their immediate community, and traffic congestion was a top concern. Nearly half of the survey respondents supported improving public transit to reduce congestion, and 26 percent believe developing communities that reduce the need to drive would be the better alternative. Just one in five said new roads were the answer.

That report got me thinking about the whole roads issue as it pertains to real estate locally. I’ve actually had some clients complain to me about the traffic congestion in Milford. Our “rush hour” lasts about an hour in the morning and another hour at night each day. We are a main thoroughfare between I-96 on the south and M-59 to the north, so most of the Highland Township residents who work in the Detroit area pass through our little Village each day. That is both a blessing and a curse. For local residents, it does add to the traffic congestion; but, for the local merchants it also adds to the customer base and helps keep our downtown alive. I have in-laws who live in Romeo and they have told me how the bi-pass out there killed the downtown businesses, one of which they owned at the time. So, it’s probably a good thing that we have a little traffic congestion twice a day. We can grumble about it, but those people passing through help keep our Village vital.

The other thing I thought about are the private roads that are so common in this area, most of them (but not all) in subdivisions that were developed as “site condos” over the last few decades. The people living in those developments may be in for a big and nasty surprise someday in the not to distance future. I have a client right now who lives in a subdivision with private roads that are falling apart. The homeowners association (HOA) has voted to repair the roads, which is estimated at $10,000+ per household. My clients are trying to sell, so they will most likely have to pony up the $10,000 from their proceeds, if we can find a buyer.

Site condo homeowners all face the same situation. The roads in the site condo complex are their responsibility; not just for snow removal in the winter, but for repairs when they come due. Depending upon how good the road work was during the build-phase, that road repair work could be coming due in 10 years or 30 years. Almost none of the HOA’s that I’ve seen are collecting and saving anything for those future repairs. Somehow, most HOA’s seem to see road repair as a “governmental thing”, thinking that somehow the county, Township for Village will step I and make the repairs. They sure will – and they’ll send the homeowners the bill.

So, if you’re considering moving into a site condo complex, read the HOA by-laws to see if they say anything about collecting for road repairs and talk to the HOA president to see what they’re doing about that. Quite honestly, of it’s a fairly new complex and you don’t plan to stay there for a long time; it may not end up mattering to you. But, if this is your retirement home or an older development that you plan on being in for years, check out the condition of the streets and the provisions of the HOA for repairs. In some cases, streets that started out as private roads have been turned over to the local government body, so check to see if that is true for the streets that are in the development that you are considering.

The final thing that I thought about was how many unpaved roads we have in Michigan and in this area in particular. I moved up here from Indiana and have lived in 6-7 other states over my life and have never been in a place where there were some many unpaved roads (I take that back, I used to visit relatives in Mississippi and they probably had as many, if not more). I understand, at some level, that it is connected to our harsh winters and the constant freeze-thaw cycles that hit our roads; which would make maintaining paved roads throughout the county too expensive. But I also know that having to drive over these unpaved roads, especially in the winter, has taken a huge toll on my cars – shortening their lives (or at least the suspension parts) considerably - not to mention how often I must have them washed just to get the mud off. The county does a fairly good job of maintaining the dirt roads in the warmer months, but they just go to pot (actually to pot-holes) in the winter months. I wonder if this is mainly a Michigan thing or whether all of the states in the Frost Belt have extensive networks of unpaved roads. Let me hear from you on that.