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Saturday, March 29, 2008

The Yin and Yang of the current market

I do a lot of Market Analyses for people, about 6-8 a week on average. I almost every case lately I'm sending the news to these people that their houses aren't worth today what they were 2-3 years ago. Unfortunately a great number of them bought these houses in the last 3-4 years, many using 100% financing gimmicks of one sort or another; so, for many, they now owe more on the houses than the houses are worth. Most will email me back that they kind of knew that was true but that they just wanted to confirm the bad news. Some are still in denial and email back reasons why their house should be immune to the ravages of the current downturn.

The truth is that all properties in this area of Michigan (and likely in Michigan overall) are down 10-15-20% from just a few years back. Some areas, like Ypsilanti and Detroit have been especially hard hit, with values 25-30% less than a couple of years back. So just going "Say it ain't so!" doesn't get it any more. It is so, so deal with it. The hard fact is that many people just plain can't afford to sell right now. If they also can't afford to keep paying for what they've got, than they are between a rock and hard place called foreclosure. The homeowner can go appeal to the bank to refinance or they can plead a case for a short sale; but nothing is going to change what the market says it will give them for the place right now. Banks really don't want the place back, but they are up to their eyeballs in foreclosures and really don't want to hassle with short sales either. It's just plain nasty, if you've in the position that you have to sell. many sellers are coming to the closing table and bringing money instead of getting money from selling their houses.

If you're a buyer, of course, the picture is all rosy. There are more deals out there than you can shake a stick at and lots of really nice properties selling for 50-60 cents on the dollar. Not all foreclosed houses have been trashed, especially if you are looking up above about $250,000. The main issue that buyers have right now is being in a position to act quickly and being decisive when you do act. Buyers need to have their financing lined up and letters of pre-approval lined up (I say letters because you may need more than one dollar amount letter ready, depending upon what you bid). If the house has just been dumped to the "move it now" price by the bank, you'll need to bid close to the asking price to get it. Messing around with a low-ball bid on a house that has just had the price dumped by the bank is a sure way to get rejected. It's OK to ask for some concessions on the closing costs, especially if you bid at or near the asking price.If you are selling and also plan to buy in Michigan at least the whole thing washes out a bit. You'll lose on the sale but make it up on the buy-side.

Some people wonder what the impact has been on Realtors. For many this market has driven them from the business. For some it has been an opportunity, especially those specializing in foreclosures. For most of us it has meant working much harder for the same or less money than in past years. The fun side of the business - the people you meet and work with - is still there on the buy side. There is little joy on the sell side; maybe just relief, if one can find a buyer and get the distressed seller out from under the obligation of the house. And holding sales together through closing is getting harder and harder as things have deteriorated. Dealing with appraisal issues and mortgage issues is consumming more and more time and energy. I spend more time staring at my green dot and then looking for my smiley face to get re-charged for another day. Let's have another rousing round of "The Sun'll come out tomorrow!"

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