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Sunday, November 30, 2008

Simplify your life…

From my weekly Iconoculture news feed on the cultural trends of our times comes this story. In crunch time, affluent Boomers are starting to simplify. Too much stuff? Enter “the Simplifier.” The new psychographic, identified by marketing expert John A. Quelch, is a middle-aged affluent looking to downsize during the downturn because she wants to, not because she has to (Harvard Business Publishing 10.15.08).

Consumers with assured wealth look around at all their stuff and feel more sheepish than proud. Why? It embarrasses them. Gas-guzzling SUVs no longer signal success, just irresponsibility. Conspicuous consumption may be out, but Simplifiers are still spending. They want to amass experiences, not possessions, and would rather savor pleasures like foreign travel than pile up yet more toys.

Even before the economic crisis, empty-nest affluents were starting to simplify. Now they're downsizing even more. Who needs a huge house when you're on the road half the time, for business and/or pleasure? The future looks bright for experience-purveyors, whether they're selling fine dining, extreme sports or adventure treks. But luxury-goods manufacturers may need to reposition their products. Truly authentic brands can flourish in this environment if they deliver a distinctive consumer experience laced with social responsibility.

From a real estate perspective, I see this in the number of people whom I work with who are looking for the “small town America” experience that Milford offers. I also often hear that the clients are downsizing and wants a “landing pad” – someplace where they can go between their travels. Many have other homes, in other climates; but desire a Michigan home base.

Depending upon what stage of the desire to simplify the client is in, it can be challenging. Many would-be down-sizers/simplifiers still ask for places that have all of the amenities of their McMansion and enough room to put all of their current possessions in. That’s not simplifying, but many have yet to get to the stage of letting go of some of the possessions that have so defined their lives to this point. Since age is catching up with most of these people, they are also asking for everything on one floor, which is tough to meet in an older Village like Milford and still be close enough to downtown to walk to dinner. Some of the newer condo complexes in our area are addressing those needs.

If you’re ready to simplify your life and you’re in my little patch of the world in southeastern Michigan, give me a call and I’ll see what I can find for your landing pad. For more on simplifying your life, read the Simple Living Manifesto at Zenlife.com or read some articles from the list below:

Stuff-onomics: Hidden Side of What You Own
Going Barefoot
Living Simplified: 10 Things You Can Do Today to Simplify Your Life
Bruce Lee’s Top 7 Fundamentals for Getting Your Life in Shape
Quitting Things and Flakiness: The #1 Productivity Anti-Hack
How to Live With Just 100 Things
A Simple Life Is A Good Life
How To Simplify Your Life
Live Frugal, but Stop to Smell the Roses
How to live simply in a 39 foot RV
Complexity is Highly Overrated
Simplicity: The Ultimate Sophistication
The Tao of Roo: Lessons in Simplicity from My Dog
People vs. Things
13 Reasons to Switch Back to Paper
How To Live A Life Less Ordinary
Do Your Kids A Favor By Saying No
10 Simple Ways to Beat Impulse Buying
50 Ways to Celebrate Life Every Day
“Simplify, Simplify!” — In the Footsteps of Thoreau
Simplicity …what we can learn about usability.
Voluntary Simplicity Movement Re-Emerges
11 Fun & Frugal Summertime Activities
The Four Laws of Simplicity, and How to Apply Them to Life
The Truth About Money and Happiness
Does Your Wallet Have A Leak?
50 Very Simple Ways to Be Romantic
Time Management, Simplified: How to Be Productive With No Worries
Why Less Is More And How To Unlock the Web
A Simple Living Guide to Buying “Stuff”

Saturday, November 29, 2008

Inspecting foreclosure homes in winter…

It is much more important when buying a foreclosure home to get a good inspection. That is because so many of them have been sitting empty for so long that all of the systems in the house have likely deteriorated some. If they’ve been left un-winterized through a winter, you can just about guarantee that there are busted pipes in the house somewhere. Even the structure, if left unheated through the cold weather, starts to deteriorate due to the extremes of expansion and contractions that it goes through. Tape pops along wallboard seams are almost always evident in those homes. Leaks around skylights and chimneys are also common, some of them again due to the extreme contractions of a frozen house.

One of the challenges with many foreclosure houses is getting all of the utilities turned back on for the inspection. The more enlightened of the banks and REO management companies will help with that; however, most will just tell you that it is your responsibility, since it has to be billed to your name, if there is a charge involved. Get out in the country and the issues become larger. Almost all country settings use well and septic systems. Wells can’t be tested without power and just the act of testing them de-winterizes the house. Things like water heaters and furnaces/boilers can’t be tested without power and gas – many times LP gas, which may require a tank fill (something that the banks don’t want to do).

While we read about thieves breaking in and making off with wiring and copper piping in urban areas, it is also not uncommon to find the same problem out in the country, especially in very secluded settings. I can’t tell you how many cold, dark houses that I’ve showed recently out in the country, several with missing plumbing and wiring. Once the wiring is messed up or the power cut off, it is only a matter of time before water issue start cropping up in the basement and mold follows the water into the house. I’ve shown numerous homes that looked great on the entry level, but which were mold filled in the basements. Another issue that will soon face us is snow cover. The snow looks pretty, but it can hide a multitude of sins on a property and you just won’t be able to see what you’ve bought until spring.

Truthfully, the issues are so much more difficult in the winter that I would strongly advise against even considering a foreclosed house that you cannot get completely de-winterized and powered up for the inspection. I cannot calculate the increased risk that would be involved. I generally tell my clients that they should just figure that anything they can’t properly inspect doesn’t work and will need replacing AND that they should expect leaks all over the house when they finally get the water system pressurized. Some deals are likely just too good to pass up and those risks are worth taking, but those are generally investor deals, where the investor has a whole crew ready to take on the challenges that they find. Most home buyers don’t have that support system or the money to take on the risks. My rule of thumb is, if you can’t inspect it – WALK AWAY!

Friday, November 28, 2008

Where are the limits these days?



These days I work with a lot of would be buyers; or people who call themselves buyers, who are really thieves trying to steal houses. These would be investors are sure that they can bid $100,000 for a house that is listed in foreclosure for $200,000, and which used to be worth $400,000 a couple of years ago. I try to counsel them not to waste their time (and mine) with these off-the-wall, low-ball bids; but they insist on making them anyway.

That started me thinking about what is really reasonable or even rational these days. What really constitutes an unreasonable bid these days? Most of these first-time buyers have read all of the bad news about real estate and concluded that everyone is in such big trouble that even outrageously low bids will be considered by the sellers – be they private sellers or the banks.

Urban legends have grown up around those mythical perfect homes that someone supposedly bought for pennies on the dollar. In the legends the homes are in great shape (maybe needing a paint touch-up here or there, but otherwise move-in ready) and the final purchases prices extremely low. The reality for most foreclosure shoppers are cold, damaged or trashed houses that may have been stripped or vandalized; and, which require 10’s or 100’s of thousand of dollars in repairs. It’s not a pretty picture, once you get out actually looking at the foreclosure inventory.

So, where are the reasonable limits? It kind of depends on where the house is in the foreclosure cycle. Early on, in the redemption phase, you can bet that the bank isn’t going to entertain bids that are too far below what they just paid for the place at the Sheriff’s Sale. Why should they? At that point they don’t have full control, with the owner still in the picture. After foreclosure, most banks will try a market testing period, where they will try to get the full market value for the house, with that value being normally determined by a Realtor. Generally they just ignore low-ball bids during that time.

After a few months they finally go into “dump it” mode and price it to move quickly. The properties normally sell within weeks of hitting that price, but that is not a time to come in and low ball that “dump it” price, which too many first-time buyers try to do – often bidding 10-20% less than the asking price. Then they are all disappointed when someone else gets the place for the asking price. The “someone else” who normally wins is a savvy investor, who bids at or above the “dump it” asking price.

I generally advice my clients to bid 95% or better of the “dump it” price, once it gets there. Many of them ignore my advice and lose house after house, until they give up or start listening to my advice. Many just sour on the whole foreclosure market and go back to looking for good deals on regular houses (which, unfortunately they like to low-ball, too). The idea is to understand for any market where the limits are of reasonableness. Buyers can learn that from their Realtor. Full-time Realtors work at every day and they know what is reasonable and what is not for any given situation. So, listen to the advice that you get from your Realtor.

Thursday, November 27, 2008

Give thanks for diversity...

From Jack’s Winning Words comes this tidbit - “What kind of a world would this world be, If everyone in it were just like me?” (Quoted in Getting Rich Your Own Way by Brian Tracy). My initial thought was – How boring would that be? It is out of the diversity of life around us that comes all of the things that make life interesting, happy, sad, frightful and comfortable. Without diversity in the people around us, who would we have to yell at or to hug? Without all of those differences in people, where would we find guidance for our morale compasses?

I’ll admit that I could stand to have a little less diversity (maybe volatility is a better word here) in our economy right now; but even this recessionary period will have positive affects over time. What we all need to be on guard about is anything that threatens that diversity. We are still a work in progress so far as ridding our country of racism, but at least we are trying. We have only to look at Afghanistan under the Taliban to see what happens when diversity of religious beliefs is quashed in any country and we have a history, built on the founding of the country of religious tolerance (of course we have gone through our own periods of religious intolerance or prejudice).

So, maybe this Thanksgiving, one of the things we have to be thankful for is the diversity all around us. We live in a country that not only allows it, but actually gains strength from its diversity. Certainly, the election of our new President is a sign of our commitment to that diversity and hopefully will benefit from it. Let’s all give thanks, in our own ways.

Wednesday, November 26, 2008

Some good ideas from California

From recent news feeds comes information about a recently enacted California law that has some good ideas about real estate foreclosures that we could use here in Michigan.

During the recent California legislative session a number of bills have been introduced that attempted to deal with various problems associated with the enormous amount of foreclosures taking place in the state. One that survived and was signed into law is Senate Bill 1137. It addresses problems experienced by three different groups: homeowners in default, renters of homes that have gone into foreclosure, and communities in which foreclosed properties are located.

The new law requires that foreclosing lenders take certain steps to help, or attempt to help, homeowners who are in default on mortgages that were originated between January 1, 2003 and December 31, 2007. At least thirty days prior to filing a notice of default (NOD – the first step in the California foreclosure process) the lender or its agent must attempt to contact the borrower by phone "in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure." The borrower must be provided with "the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency."

In the event that the borrower’s billing or contact address is different from that of the property, the lender is obliged to notify any residents (such as renters) when a notice of sale is posted. The notice shall be posted on the property and also sent by mail. It must be in English, Spanish, Chinese, Tagalog, Vietnamese, and Korean (California’s major spoken languages). We’d likely need to include Arabic and maybe a few Eastern European languages here in Michigan – Ed. The notice advises residents that the property is in the foreclosure process and may be transferred as soon as within twenty days. It also tells them that the new owner may give them a notice to vacate. The notice, must be for at least 60 days, not the usual 30, as a result of SB 1137.

Finally, the law provides that the new owner of the foreclosed property (whether it be the foreclosing lender or a successful bidder at the auction) must maintain vacant residential property. Failure to maintain means "failure to care for the exterior of the property, including, but not limited to, permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action to prevent trespassers or squatters from remaining on the property, or failing to take action to prevent mosquito larvae from growing in standing water or other conditions that create a public nuisance." This law authorizes local jurisdictions to fine the new owner up to $1,000 per day – given proper notice and time to respond – for failure to maintain property as specified.
We really could use that locally. Local Home Owners Associations have been trying to do something to keep neighborhood values up, but they have had a tough time enforcing their orders to keep up properties, especially with banks, which tend to just ignore their requests.

These are all reasonable ideas to help deal with the fall-out of the greatly increased foreclosures that we are experiencing all over the country. Hopefully, Michigan lawmakers will consider similar laws for our state.

Tuesday, November 25, 2008

You read it here first!

Back on September 23rd I opined that the sleazy operators in the mortgage business would find a way back into the game, just as they always have in the past. After all, many of the guys who got the country into the Savings and Loan mess at the end of the last century are the same ones turning up in charge again in the current mortgage meltdown. They are the slick operators who understand how to game the system to make a buck. They wrote most of the bad business that was then packaged up and “monetized” as derivatives by the Wall Street companies that have since gone out of business or been bought up.

Well, last week's Business Week magazine reports that the sleazeballs have repackaged themselves, many changing the name of their operations, and now are in the process of writing bad FHA-back loans. The Business Week article carried the opinion that the next wave of failures that will need to be bailed out will be of FHA-back loans.

At issue are the same practices that got the mortgage industry into trouble in the first place – slick operators writing bigger loans for houses than the borrowers can really afford. The FHA-backed loan process was set up to help people who otherwise might have difficulty getting loan to qualify for the mortgage by having the government (FHA) guarantee the loan. This has attracted the slick-Willy operators in the business like flies to an open garbage can. One reason is that the FHA organization is currently overwhelmed by requests. FHA-backed loans went from about 4% of US mortgages in 2007 to 26% this year. The FHA just can’t handle the workload and police the issuers, too; many of whom are failed sub-prime lenders who just changed their name and shifted to FHA loans from their old line of bank-backed loans.

So, the Business Week article concludes that sometime soon the FHA will be lining up for a taxpayer bailout. The default rate has reportedly already climbed to 5.7%, which is 53% higher than the national average; and, cases of fraud are on the increase as the wolves in this business learn how to game this system. There doesn’t appear to be any end to the cycle of sleazy operators finding new ways to get around rules and common sense and to do bad business, at least not when at the end of every tunnel there is a taxpayer bailout waiting.

It’s time for some major perp-walks and prosecutions, and to allow some major bankruptcies; and, then to enact some good, common-sense oversight regulations. How many times are we going to put up with the likes of the Dewey, Cheatum and Howe Mortgage Company figuring out new ways to write bad mortgages on our dime.

Monday, November 24, 2008

Fannie and Freddie take a break



From a recent press release comes this news - Fannie Mae and Freddie Mac will halt foreclosures of occupied dwellings from Nov. 26 to Jan. 9 so that mortgage loan servicers have more time to develop workout plans for struggling borrowers.

The plan could buy extra time for approximately 16,000 borrowers to try to save their homes, according to the mortgage giants, but some experts worry that it only will delay inevitable foreclosures.

Meanwhile, the companies will commence a streamlined modification program on Dec. 15, under which hundreds of thousands of borrowers shelling out over 38 percent of earnings on mortgage payments could see their payments lowered by lenders.

Several large companies, including Citibank, Chase Bank and Wells Fargo have launched major mortgage workout programs to help those homeowners that they inherited in their buy-outs of failed lenders like Countrywide and Washington Mutual. So, check before you let things slide into foreclosure or choose to try a short sale. There really is hope for homeowners.

No one benefits from all of these foreclosures and all of the banks are realizing that and trying to keep good, honest and hardworking home owners in their homes, if they can. There are some, maybe a lot, of these cases where the homeowner’s life circumstances have change so dramatically; or, where the loan abuse is so egregious, that there really is no way to find a workout that will work for all parties. So, we are still going to see foreclosures or have needs for short sales. If that’s the case for you, visit my Web site for short sales – http://www.mishortsales.net/. At least get some pros working on your side, if you have to go that route.

The key for distressed home owners more than ever is communications. Get on the phone and call your lender. Explain your situation and ask if they have a workout program. Tell them that you don’t want to loose the house and that you are capable of making reasonable payments to keep it – just not what your current mortgage requires. They may make you jump through a few hoops, but that’s a better thing than losing the house, so be ready to do whatever they ask of you – sending lots of records ands paperwork will likely be a part of the program.

If that doesn’t work, ask them if they will consider a short refi, in stead of going into a foreclosure (see the FAQ section of the site above for more on that). If they won’t even do that, then you may have no alternative than to consider a short sale. At that point, you have to accept that you will lose the house, but maybe that route will allow you to get back into home ownership faster than going through a foreclosure. Go to my Short Sales site for more on your options.

Sunday, November 23, 2008

Move your feet

The Jack’s Winning Words blog that I get on a daily basis recently had this tag-line - “Do not ask the Lord to guide your footsteps, if you are not willing to move your feet.” I got to thinking that you can easily generalize that into a non-religious bit of helpful advice but just saying, “Don’t seek help, if you are unwilling to act.”

In my little world at the local Real Estate One office, I’m both a seeker of help and a giver of help. Fortunately, our office manager is very patient with me and others who need to be given the same advice over and over, in order for it to get through or in order to cause any change. Mostly it boils down to this – I hear it, I understand it, it makes sense, I just don’t do it. I’m unwilling to move my feet.

There are things that one has to learn to become a successful Realtor. Some are about the art/craft/profession (whatever you want to call it) of selling – learning how to deal with people, present properties, handle objections and all of the other things associated with selling anything. Some are about the process itself – understanding the various contract documents, the steps that a sale must go through to get to close and the role of the Realtor in each step and all of the legal nuances that the Realtor gets involved with in a sale. Then there are the systems that a Realtor must be able to use to get his/her job done – various on-line sources of information, computer-driven document systems, computer-oriented photo systems and more. It can look and feel fairly daunting to the newbie agent, so we use a mentoring program to pair new people with “experienced agents” in our office.

I experience the other side of the equation in my role as a mentor to some of the new agents in the office. Some pick things up right away and run with it, with some I have to go over the same ground many times, but they eventually get it and some just never seem to get it, or maybe it’s just that they just don’t want to do it. It may be that it is easier to have me walk them through it, yet again, than to spend the time and effort to learn how to do it themselves. I’ll have to think about that.

It may be that they (and me most times) are just seeking someone to commiserate with, rather than actually asking for help that they intend to act upon. My manager finally had to try the tough-love approach and just tell me point-blank that she is tired of telling me the same thing over-and-over about making prospecting phone calls (I hate cold-calling and have a pretty big aversion to making unexpected phone calls on anyone). We’ve discussed (over and over) the need to set aside time to just don this task and to bite off a few calls at a time, rather than sit there with a huge, daunting list. I know I have to do it. It makes sense to do it. Now, move feet!

Saturday, November 22, 2008

New hope for Hope

From a recent news source comes this story of renewed hope.The Bush administration said recently that it was changing its nearly-moribund mortgage rescue plan in an effort to spark more lenders and homeowners to participate.

The Department of Housing and Urban Development's Hope for Homeowners mortgage rescue plan, which Congress toiled over for months before passing legislation last summer, took effect Oct. 1. The program aimed to help hundreds of thousands of homeowners by putting up government insurance behind cheaper, refinanced mortgages, for people at risk of foreclosure. But since then, few troubled mortgage loans have been modified under the plan. Now, in an effort to kick start it, HUD is trying to open up the program to more homeowners. "Clearly, meaningful changes were needed," said HUD Secretary Steve Preston. "These modifications should increase lender participation and help more families who are having difficulty paying their existing mortgages, but can afford a new affordable loan insured by HUD's Federal Housing Administration."

Smaller write downs: In the biggest change, lenders that participate in Hope for Homeowners won't have to write down loans as much as they did under the original rules for the program. The new guidelines allow them to reduce mortgage principal to 96.5% of a home's current market value - instead of 90%. The new ratio guideline only applies to those whose new loan payments would not exceed 31% of their gross incomes. The write down will remain 90% for borrowers who are paying a larger percentage of their income toward their mortgage debts.

"This balances competing aims of encouraging more borrowers to enter the program while controlling for potential losses due to re-defaults," Tom Deutsch deputy executive director of the American Securitization Forum, a group that represents the interests of investors in mortgage backed securities. The smaller write downs make it cheaper for lenders to participate in this strictly voluntary program.

The second change involves second lien holders, such as home equity lenders, of homeowners seeking to refinance into HUD loans. Payments to lien holders: Under the changes announced Wednesday, HUD will make up-front payments to get second lien holders to relinquish their rights to future payments.

Second lien holders often slow the mortgage modification process because they have nothing to gain from agreeing to refinancings, known as workouts. The values of the collateral - the homes - are almost always less than the amounts borrowers owe to the primary lenders. The amount of payments to second lien holders will be negotiated on a case-by-case basis, according Deutsch. The more a loan is underwater - meaning a borrower owes more than a home is worth - the lower the value of the second lien and the less HUD will likely pay for releases. Deutsch said he expects the payments to range between 5% of second lien in cases of the most severely underwater loans to as much as 30% for mortgages that are not as far gone as that.

40-year mortgages: Lenders will be able to extend the terms of loans to 40 from 30 years. Extending the number of months borrowers have to repay their mortgages reduces monthly obligations. Sometimes that can make the difference between affordable and unaffordable loans.

No more test runs: In addition, the original legislation mandated a three payment trial term, during which borrowers had to pay faithfully before the modification became permanent. The new guidelines eliminate that requirement.

Let's all hope that these changes will allow the Hope for Homeowners program to live up to its name. I certainly hope so.

Friday, November 21, 2008

2009 Home Features Trends

In a recent news release (Charlotte, N.C., Nov. 10, 2008), Crescent Communities of South Carolina identified the hottest new home trends expected for 2009 after compiling information from buyers and prospects in all its Charlotte-area luxury communities.

"These are the most requested items from our discriminating buyers," said Craig Martin, sales manager for Crescent Communities. "These trends are reflected in the custom and Ready to Customize (RTC) homes being built in our communities." Likely they will have applicability in our local market, too.

Here are the top nine trends expected in 2009:

Less Square Footage: Buyers are examining their lifestyles and the most important aspects of their new homes. The result is a smaller home that maximizes the square footage. But, a smaller home does not mean sacrificing on luxury. You'll find that these homes still have expected luxury features -- granite countertops, top-of-the-line appliances, upgraded trim packages and luxurious owners' baths. Even in the largest, most luxurious homes, you'll find that one room or more has been eliminated to reduce the square footage.

Room to Store: In the old days, closets were scarce. As the years have progressed, homeowners have demanded more storage space. The trend is for bigger, walk-in closets with built-in storage systems and packing islands. The idea is to avoid wasted space and maximize the square footage of the home. Built-in niches and attic storage rooms provide a purpose for otherwise unusable space.

Outdoor Living: The past few years have seen a steady rise in the popularity of outdoor living space. This trend doesn't seem to be going anywhere anytime soon. It's especially true in the South, where suitable outdoor space can be used for at least three seasons. And, many homeowners are requesting screened porches so they can enjoy the outdoors as long as possible. Others request open patio areas that feature fireplaces and built-in kitchens.

Universal Design: Features like sunken living rooms, spiral staircases and tall cabinets were once popular, but those days seem to be behind us. Today's homes (and likely tomorrow's) are easy to move around in, regardless of the physical limitations you or your family members might have. Wider hallways and doors, fewer stairs (and even elevators in larger homes) seem to be standard. Architects often use the phrase "universal design" to describe homes with features like these because they are comfortable for people of all ages and abilities.

Designing for Women: It's no secret that women are the driving force behind most home-buying decisions. So, it stands to reason that homes are designed around features that are important to the fairer sex. Drop zones help keep the home's main spaces free of clutter. Extra-large laundry rooms, luxurious spa-like owners' baths with inviting tubs and state-of-the-art security systems are features important to women.

Green AND Healthy Homes: Buyers are increasingly savvy to environmental friendliness as it pertains to their homes. The green movement is not only a trend, it's becoming more of "the norm." Buyers are seeking improved ways to make their homes more efficient and reduce utility costs. And, buyers are ready to go a step further. The use of paints with low levels of volatile organic compounds (VOCs), carpets that emit no or lower gas levels and recycled materials on the job site all help make a healthier home. Also, a better insulated home not only saves energy, but it also keeps dangerous allergens out of the home, thereby helping to keep your family out of doctors' offices and drug stores.

Smarter Homes: Today's home wiring includes more than standard electrical connections. Dedicated wiring for data, telephone, audio and video are standard options. In-wall speakers, intercom systems, wireless networks and options to control lighting and temperature (even when you are not at home) are highly requested options in today's high-end homes. You can even install security cameras to keep an eye on the kids when you are away ("nanny cams") or see who's at the door before you open it. It all adds up to convenience, safety and peace of mind for today's luxury home buyer.

The Kitchen Still Brings the Heat: It's impossible to do a hot home trends list and ignore the kitchen. It remains one of the most important areas in the home, and luxury buyers continue to seek ample space and storage, restaurant-quality appliances and high-end finishes. But now, utilitarian extras such as recycling organizers, specialized storage options and walk-in pantries are requirements. And, islands are still a craze and will remain so, although the best are unique and are much like pieces of furniture. They tend to not match the kitchen's cabinetry, making them true standouts.

Homework Habitats: A designated space for working at home has gained in popularity during the last few years, and seems to be growing more. The recent economic concerns, along with gas prices, have caused more companies to encourage employees to work from home in an effort to cut costs. Sufficient home office space is a necessity in this new environment. A good home office combines the efficiency of an office with the comforts of home.

Admittedly Crescent Communities is catering to a more affluent audience than might be found in the average community; however, remember the “trickle-down” affect that is supposed to take place when the more affluent do something. Some of it somehow makes its way into our everyday lives. Besides, it is good to see any trend information that is not coming out of California.

As I read through this list and compared it to what customers that I’m working with are saying that they want, I’d say they have pretty well captured the things that are important today to buyers. The only changes that I might make would be in the order of importance of items on the list.

Thursday, November 20, 2008

Time to winterize...

Many houses that are ion the market are vacant for one reason or another. Cold weather is here already and it’s time to winterize your house if it is going to sit vacant this winter. There is little that can cause more damage and reduce the value of your property faster than frozen pipes that burst and flood your house.

Many of the homes that you see on the market that used to be $300-400,000 house and which are now selling for $100,000-150,000 are that cheap because they sat through last winter and had frozen pipe problems. Nor only is there water damage, but there is inevitably mold in those houses, too. Some are virtual tear-downs now due to nothing more than frozen pipes. So, it’s time to winterize; but, what does that mean?

A winterization generally involves:

-draining of all plumbing and heating systems as required;
- using air pressure to clear the system of water;
- adding anti-freeze to all traps and fixtures;
- shutting off water supply to the property;
- disconnecting the water meter, removing it from the cradle and leaving it on the premises;
- disconnecting the feed pipe leading to the main water valve and plugging or capping it; and
- placing tags, labels, warning signs, and dates on all items winterized, including the address and telephone number of your winterization company on all tags and labels.

The cost to winterize a house varies by the size; but, figure about $250-400. That is nothing compared to the damage that will be caused by a frozen and broken pipe. This is just the same as having your lawn sprinkler system blown out and winterized and certainly much more expensive than it would be if you lost a sprinkler head to ice.

You may say, well I’m going to leave the heat on all winter, so I don’t need to winterize. Well, what happens when the power goes out for a few days and the furnace doesn’t work. Or, say the furnace just has a problem of its own and won’t kick on. It’s doesn’t take more than a day for pipes to freeze and break. Then, when the furnace does kick back on and the water thaws, you are toast and so is the house.

So, have your house winterized if it is going to sit all winter, or even if you’re just going to Florida for a month of so. It is low cost insurance compared to the possible cost of a failure. Real Estate One has Winterization Services available under its Home Services One Program. Go there for a directory of all of the services and special deals that Real estate One customers can get on things like PODS for storage and Sears Home Appliances.

Wednesday, November 19, 2008

Top 10 real Estate Markets...


Housing Predictor, which provides housing forecasts in 250 markets, has identified 10 markets where the regional economies are healthy and have strong potential for increasing prosperity.

These housing markets have bucked the national trend in 2008 and avoided the subprime crisis, the consultancy says. Whatever the future holds for the housing market as a whole, Housing Predictor forecasts that these cities will continue to see steady, dependable growth.

Top cities and the percentage sales prices have increased so far in 2008.

Biloxi, Miss., 4.9 percent
Salem, Ore., 4.7 percent
Bismarck, N.D., 4.6 percent
Spokane, Wash., 4.4 percent
Yakima, Wash., 4.1 percent
Austin, Texas, 4.0 percent
Grand Junction, Colo., 4.0 percent
Fargo, N.D., 4.0 percent
Mobile, Ala., 3.9 percent
Albuquerque, N.M., 3.5 percent

I went to the Housing Predictor Web site which as one might imagine is at http://www.housingpredictor.com/ and looked around. It is a nice collection of data and articles from a variety of sources and from research that they have apparently done themselves.

As one might expect, they had a worst 25 list for real estate too and Detroit was on it at number 4 on their list. They show a loss in value of about 18% year-over-year for Detroit, which is consistent with what I've been reporting here. Grand Rapids and Flint also made the worst 25 list.

It is noteworthy that Biloxi, Mississippi is also one of the area that was hardest hit by Hurricane Katerina, so much of it is being rebuilt or has been already. Maybe that is why it is growing so much. Our area is currently being pummeled by Hurricane Recession and will likely need rebuilding when that is over.

I'm not really sure what one is to do with this valuable information. After all, if you are living in one of the bottom markets and about to take a big hit when you sell, why would you want to go to a top market area, where you will pay more for a house? But, I suppose that if you are a real estate investor and want a safe place to invest, then knowing what markets are growing and appreciating would be a good thing. So now you know!

Tuesday, November 18, 2008

Playing life's little games

If you’re bored and what to play a game that is homeowner related, try this little home-maintenance action game Home Owners Revenge.The game demonstrates to home owners how their homes may be at risk from leaves, birds, and other critters that invade the plumbing pipes on their rooftops.

"This new, interactive video game is designed to give tormented home owners a creative outlet while educating them and encouraging them to have a good time," said Kenneth Brown, president of the creator of the game, JAF Industries.The game tests speed, hand-eye coordination, and includes three proficiency levels: easy, hard, and insane. Miss a falling leaf or bird and the penalty is a big bill. Get too many bills and you lose your home.

Of course, every time you lose the game you get a commercial for the services of JAF Industries, but hey, we already said that you were bored. The real point of the game is to let you see the damage and potential repair costs of letting debris and critters have access to your plumbing pipes.

I suppose we could have a similar game where leaves collect in your gutters and then they fall off or water drips off and gets into your basement or ice dams build up and your roof leaks. What fun!

Perhaps in our modern attention-deficient-disorder oriented world games like this are the only way to get attention on problems that need attention. Maybe we should have a mortgage foreclosure game. You could watch as the little cartoon sheriff auctions off your house and then kicks your little cartoon behind out of the house. You’ll be laughing all the way to the curb. Wait! Maybe a little cartoon congressman will appear out of nowhere, with little cartoon fists full of money and bail you out. How can real life get any better?

Someone pass me a pen. I want to draw a little cartoon Lotto official showing up at my door to tell me that I won the Big Game Lotto drawing. Then you can have the pen back.

Monday, November 17, 2008

We’ve all been hit lately…

From the Jack’s Winning Words Blog - “Everyone has a plan until they are hit.” (Evander Holyfield). Certainly Evander’s words apply to almost everyone in the real estate world lately, whether buyers or sellers or agents.

Many buyers have been socking away money for a down payment for years, only to see that money (if it was invested in almost anything) melt away in the current financial mess. All of a sudden they have less than the 20% that mortgage companies are demanding these days. There are still programs available that require less of a down payment, but the limits on what one can borrow are lower and the credit requirements are likely higher than they were a year ago.

Sellers are the “punch-drunk” participants in this process, having been hit with a combination of punches – falling house values (BAM), ARM’s that have reset to alarming levels (BOP), and fewer buyers out looking (BASH). It’s a wonder that any are still on their feet. Indeed many have gone down for the foreclosure count and some have just said “No Mas,” thrown in the towel and walked away from their houses. The ones who remain on the market look a t lot like Rocky Balboa at the end of his first fight with Apollo Creed.

And what of the Realtors involved in all of this? Well, quite a few have exited the arena and many now have day jobs to try to make ends meet. I’ve opined here a couple of times about dealing with part-time Realtors who have full-time jobs, so I won’t go there, now. Let’s just say that the remaining practitioners are working harder and making less than they were before all of this mess started. Some have turned themselves into REO specialists (that stand for Real Estate Owned, the term that applies to foreclosed, bank-owned properties). Others have become (or purport to be) short-sale specialists (I have a Web site dedicated to that, for instance – http://www.mishortsales.net/).

Many Realtors, and I am one, are focusing more upon the buyer side of the equation. Why? Because, to steal a phrase from famous bank robber Willie Sutton; who, when ask why he robbed banks, replied, “That’s where the money is.” It just makes sense to work with the only people in the game who are bringing money with them to the process. Of course many sellers are having to bring money too, but that’s another story.

I still take listings and go out on 1-2 listing calls a week; however, the number that I take is down, because I won’t take a listing if the seller is unrealistic about the price. It just doesn’t make sense to take overpriced listings in the current market. Listings represent costs to a Realtor – the costs to advertise in support of marketing the place. If the Realtor can see, up front, that those expenditures are going to be wasted on a house that won’t sell at the listed price, then why take it in the first place? Some Realtors will take bad listings thinking that they can talk the client down later; but, they just end up "chasing the market down." Some take listings just to get signage exposure; hoping that their signs will attract buyers they can work with or maybe a few, more realistic listing clients. I don't buy into either of those strategies. If I take a listing it is to sell the house, period.

So, that’s my plan and I’m sticking too it…until I get hit!

Sunday, November 16, 2008

Looking for bright spots amidst the gloom…

Two reports released recently indicate bright spots in Michigan's real estate market, but industry experts say we've got a way to go before things are normal.

Sales are up nearly 28% compared with last October in metro Detroit, and Michigan foreclosure filings are down 15% from a year ago, but still up by nearly 8% from last month. Residential and condo sales in metro Detroit rose 27.7% in October to 5,687 from 4,452 in October 2007, according to Realcomp, a Farmington Hills-based multiple listing service. Realcomp's figures come from closed sales reported by its Realtor members. Sales continued to boom in foreclosure-laden Detroit, which saw a 42.2% jump in sales to 1,126 properties from 792 in October 2007.

Realcomp noted that sales are on a positive trend for the 10th straight month in metro Detroit, but Richard Dugas, CEO of Pulte Homes Inc. of Bloomfield Hills, cautioned against too much optimism. "The sales velocity is up, but a huge percentage of the resale number is foreclosed sales," Dugas said. "It is optimistic to say a sales jump so driven by foreclosures is a signal of the bottom. A huge amount of resale inventory that is not foreclosures is not selling."

More than 44% of October sales in metro Detroit were of foreclosed properties. There is a 10.7-month supply of homes on the market at the current sales pace. A three- to six-month supply is considered normal. Locally, we are running right at 45% of sale being foreclosed properties, down from the peak, which was well over 50% for a while. Our Milford office has had its best sales months ever for three straight months, in terms of units sold; even thought he dollar volume is down.

Michigan ranked seventh nationwide in October for foreclosure filings with a total of 11,393 or one from every 396 households, according to RealtyTrac Inc, an Irvine, Calif.-based foreclosure Web site. That compares with a national rate of one foreclosure for every 452 households. The filings include 5,223 notices of default, 434 notices of sale and 5,736 bank repossessions, RealtyTrac said. RealtyTrac said national foreclosure activity is up 25% from October 2007 and up 5% from September.

Another thing that mars the positive home sales picture is that prices are still on a downward spiral. In October, the median price of homes sold was $70,000, a 40% drop from the $117,000 median sales price in October 2007, according to Realcomp data. In the local market that I track weekly the pace of decline seems to have dramatically slowed, but the median price is still declining each week. You can see this at my Web site – http://www.themilfordteam.com/ – and click on Real Estate Statistics. There is a Year-To-Date Market Statistics chart that I have been keeping since January that shows a week-by-week look at the market that I track, which is comprised of Milford, Highland, Commerce, White lake and West Bloomfield Townships. I‘ve also kept a detailed record of what has sold locally, on a monthly basis and there is data going back over a year for that report.

Of course the second shoe waiting to drop for us locally is what will happen in the automotive industry. There are just no scenarios that don’t contain lots more layoffs, plant closings and other bad financial news. Our market will be impacted greatly by whatever happens there, with more foreclosures sure to follow every round. of plant closings and layoffs. Hopefully we can get everything that’s going to happen in that industry behind us soon, so that we can figure out where we are and come up with a plan to recover. In that regard, hope springs eternal.

Saturday, November 15, 2008

1/3 of sold homes sold for a loss...

Back in October I reported on an analysis by Moody’s Economy.com, about 16 percent of U.S. home owners, or one in six, owe more on their mortgage than their home is worth. About 4 percent were under water in 2006 and 6 percent last year, Economy.com reported. An analysis by Zillow.com estimates that for people who bought their homes in the last five years, the situation is worse: 29 percent owe more than their homes are worth.

Now a new report released recently from Zillow.com says that nearly one-third of homes that sold in the last year went for less than what was owed on them The real estate website calculated that homes values fell 9.7 percent compared to a year ago in 163 metropolitan areas. Compared to the market peak in 2006, home values have fallen 12.8 percent. Home prices have declined for seven straight quarters, according to the report. Over the past year, 30.2 percent of homes sold were sold for a loss. In 17 markets – 14 of them in California – more than half of homes sold in the past year were sold for a loss, the Zillow.com report said.

Locally I can attest to this trend. Of the last five houses that I’ve sold, four of the sales resulted in the seller having to bring money to the closing table and three of them had to be re-negotiated on price, because the appraisal came in for less than the agreed upon sale price. Prices have dropped so far, so fast that even real estate professionals are having a hard time advising their sellers on how quickly and low far to reduce prices.

Basically in our area the “values” of homes have plunged between 18-28% in the last three years. So if you bought a home for $200,000 in 2004, it is likely worth only $150-160,000 now. Even it you put 15-20% down on the home, you are likely underwater right now, since you mortgaged $180-185,000 when you bought.

What can you do? For now tread water and hope that some combination of government programs like Hope for Homeowners or some of the other bail-out programs provide an avenue for relief. More and more of the big banks that bought the failed mortgage lenders have come out with re-work programs for the mortgages that they inherited with those buy-outs. Chase Bank, which bought the troubled Countrywide Mortgage operation, is now offering to restructure up to 800,000 loans where the borrowers are under water. The buyers of IndyMac bank and Wachovia Bank will likely have similar programs or may already have announced them. Locally homeowners who mortgaged through Cleveland-based National City Bank should look for a program from its new parent – PNC financial Group of Pittsburgh, PA.

If you are at or near your wits end on how to keep up with your mortgage, you may want to give your bank a call as see if they have a workout program in place. Most are probably not gong to do a lot of advertising about those programs, but will wait until they are called by the homeowners. If that doesn't work out, visit my Web site - http://www.mishortsales.net/ - to see what your options are to avoid foreclosure.

Friday, November 14, 2008

Prevent chimney fires...

I got behind a service truck the other day that got me thinking about this topic. It was a truck from one of the local chimney sweep services. I haven’t had my chimney done in a few years and need to get on that.

The National Fire Protection Association advises, "Chimneys, fireplaces, and vents should be inspected at least once a year for soundness, freedom from deposits and correct clearances. Cleaning, maintenance, and repairs should be done if necessary." This is particularly important in common wall communities like condominiums and townhouses where a chimney fire can spread to neighboring units.

The Chimney Safety Institute of America recommends that open masonry fireplaces should be cleaned at 1/4" of sooty buildup, and sooner if there is any glaze present in the system. Factory-built fireplaces should be cleaned when any appreciable buildup occurs. This is considered to be enough fuel buildup to cause a chimney fire capable of damaging the chimney or spreading to the home. The fact that fireplaces are rarely used doesn’t change the need for inspection. Birds and other animals may build nests in the flue or there may be other types of deterioration that could make the chimney unsafe to use. Chimney caps rust away defeating the spark protection features. For a great article on the “anatomy” of your fireplace click here.

The chimney is one of those “out of sight-out of mind” areas of maintenance in most houses. We never seem to think about them when we are using them and by then it’s too late. For a great FAQ section by the Chimney Safety Institute of America, click here.

Finally, there are differences in the woods that you might burn in your fireplace that can make a big difference in how fast creosote build-up occurs in your chimney and how much risk there is for a chimney fire. Click here, for an article to read on that topic.

Before fall turns to winter and fireplace burning starts, arrange this critical fire safety inspection and make sure to include it in your budget next year as a line item so you don’t forget to do it. The key is to just do it.

Thursday, November 13, 2008

Do you suffer from PDS?

From a recent Realtor.com news feed comes this interesting article. Many sellers are suffering from an unfortunate condition called PDS (Price Denial Syndrome), said real estate trainer David Knox, of David Knox Productions in Minneapolis.

These sellers tend to resist the reality that they must lower the listing price of their home, unwilling to accept that the days of the boom market are gone, said Knox, who spoke at the REALTORS® Conference & Expo in Orlando last week.

Common symptoms of Price Denial Syndrome include blaming their real estate agent for suggesting a price reduction and trying to justify why buyers would pay the higher price.

But we all know the truth: Homes are simply not going to sell if they are overpriced in the current market. In a hot market where demand outstrips supply, overpriced homes might sell, but in a falling market, overpriced homes sit unsold.

Sellers with Price Denial Syndrome offered these common objections:

“We really need the money.” The market really doesn’t care what you need from the house. The market only cares about what other similar house are selling for or have sold for recently.

“We can always reduce the price later.” Well, yeah, after all the potential buyers have by-passed your house. If you let the house set on the market for too long, because you have overpriced it; by the time that you get it priced right people will wonder what is wrong with it to cause it to sit for so long.

“Could we just try it at this price for two weeks?” The first couple of weeks that a house is on the market are generally the busiest, if it is priced right; because agents always are looking for something new to show their buyers. So you missed the “buzz” of being new, by being overpriced. Then there is the funny way that those “two weeks” turn into two months and you end up further behind the market.

"The guy down the street got what I want for mine last year" Sure and the year before that someone else in your area got even more. We have been dropping in values and price about 1% per month for the last 18-24 months. Forget what someone else got for their place some time back. That market is gone. You have to price to the market that is front of you right now.

“They can always make an offer.” They just really don’t get it. People won’t even see it; much less make an offer, if the house is overpriced for the market. Lots of buyers just don’t feel comfortable making “low-ball” offers, which is what they might have to do if you are really overpriced.


"My sister-in-law is a realtor in Chicago and she says that things aren't really that bad and that I should be able to get my price." I love that one. Someone in another state who doesn't understand our local market and likely doesn't understand how your home compares to others in the market is giving you advice - and you're listening! Talk about the blind leading the blind.

If you feel that you may have PDS, start by re-reading some of the many local media articles about housing value loses in your area. Go to my Web site and click on the Real Estate Market Statistics choice and then go down the page until you see the Zillow.com logo. If you click on the highlighted link in that paragraph you will go to an interactive Zillow.com page that will allow you to roll your mouse over your location and those around you to see just how much value has been lost in the last year in your community. Of course, I've focused upon the market in my little corner of southeastern Michigan.

After that, call or email me and ask me to do a Comparative Market Analysis for you on your home. You may not like the result, but it will be an honest report, supported by data, of what your house is currently worth on the market. You don’t have to like it, but you can’t deny it. If you want to sell or if you need to sell, that is what you are likely to get. The challenge then becomes how fast you can get that price for the house. I can definitely help with that, too. Call today.

Wednesday, November 12, 2008

First-time buyers making up a bigger share...

The 2008 National Association of REALTORS® Profile of Home Buyers and Sellers reveals that the number of first-time buyers have risen as a percentage of the market share and they plan to own their homes longer than buyers in the past. Lawrence Yun, NAR chief economist, said a higher share of first-time buyers makes perfect sense, and it’s a trend he expects to grow.

“First-time buyers are much more flexible in entering the market because they aren’t concerned about selling an existing home,” he said. “Given low home prices, plentiful supply, and affordable interest rates, it’s been an optimal time for entry-level buyers with a long-term view.

“Considering the temporary first-time buyer tax credit and improvements to the FHA loan program, we expect stronger entry-level activity as the flow of credit improves – that, in turn, should free more existing owners to make a trade in 2009.”

The number of first-time buyers rose to 41 percent from 39 percent of transactions in last year’s survey and 36 percent in 2006. “Although modest, this is a meaningful gain for the 12-month period ending at the close of June, and more recent independent data show a stronger uptrend in first-time buyers who are helping to reduce excess inventory,” Yun said.

According to the NAR study, the median age of first-time buyers was 30, down from 31 in 2007, and the median income was $60,600. The typical first-time buyer purchased a home costing $165,000 and plans to stay in that home for 10 years, up from seven years in 2007. The median down payment by first-time buyers was 4 percent, up from 2 percent in 2007; the number purchasing with no money down fell from 45 percent in 2007 to 34 percent in the current survey. “The study covers transactions through the middle of 2008, so we can assume the down payment numbers have shifted recently because credit tightened and no-down payment loans all but disappeared around the close of the survey,” Yun explained.

Of first-time buyers who made a down payment, 69 percent used savings and 26 percent received a gift from a friend or relative, typically from their parents. Another 7 percent received a loan from a relative or friend, while 16 percent tapped into a 401(k) fund, stocks or bonds. Ninety-two percent chose a fixed-rate mortgage.

The percentage of buyers who purchased a home in foreclosure jumped to 6 percent of transactions in the 2008 survey from 1 percent in 2007. Another 38 percent of buyers considered purchasing of a home in foreclosure but did not, primarily because they could not find the right home. From personal experience I can tell you that many, if not most, first buyers are looking first at foreclosure homes. Then, they go on to look at regular sale homes; once they see what sad shape most foreclosures are in. They realize fairly quickly that they don't have the skills nor the time to put into a fixer-upper house.

First-time buyers can get a wealth of information and helpful tips and links at my Web site for first-time buyers - http://www.mihomebuyer.com/ - go there and let me know what you think.

Tuesday, November 11, 2008

Boomer needs driving home and condo developers…

From a recent news feed comes this story about the upcoming wave of retirements and home downsizing by the so-called Baby Boomer generation. It is influencing what condo builders and home builders are doing. Two-thirds of baby boomers who make more than $100,000 intend to downsize in suburbia, according to a report from building industry watcher Hanley Wood. Boomers are the Americans born between 1946 and 1964 and number 78 million strong -- 28 percent of the population.

Robert Tippets, past-chairman of the 50+ Council for the National Association of Home Builders, says the growing force of silver-haired buyers will influence the building trends and designs of condominiums in the coming years. "For one thing, units are getting larger to accommodate empty nesters who want extra rooms for offices, computers and guest quarters," he says. In the past, it was hard to get larger units that size outside of luxury condominium projects.

Another survey of baby boomers by active adult developer Del Webb Boomers demonstrates the mobility of boomers as they age: 44 percent want a smaller house once they begin the empty nest season of life. Many Boomers want a place that they can “lock and leave, as they pursue their dream of retirement travels. Condos tend to work well for that.

The same percentage wants a home that requires less maintenance as their top reasons for moving.

62 percent rate maintenance as a "paramount issue in choosing a home"

36 percent plan on moving more than 3 hours away from their current residence, many into areas that will allow them to be closer to children

26 percent are planning to purchase a home in an active adult community when they retire.

From what I see in this area there is also a movement towards small, walkable communities, like Milford; with downtown areas that feature coffee houses, restaurants and useful stores. The retirees that I have worked with also want places with everything for them on the entry level and do not like condos with multiple levels and lots of stairs.

With development pretty much stalled out in this area, we don’t see a lot of new developments to examine for these trends. Many of our local condos were build or planned years ago, so they are still the townhouse style that younger people tend to like, many with garages underneath, so that one has to climb at least on set of stairs to even get to the living space. Retiring Boomers are not going to like that. We’ll have to wait out the current building lull to see how local developers react to the coming wave of Boomer downsizing.

Monday, November 10, 2008

The USDA Loan…



There is a loan type available to many in this area that we kiddingly refer to as the USDA mortgage (as in USDA prime meat) and it really is a program under the U. S. Department of Agriculture. Here is its mission statement from it’s Web site.

Rural Development is committed to helping improve the economy and quality of life in all of rural America. Through our programs, we touch rural America in many ways. Our financial programs support such essential public facilities and services as water and sewer systems, housing, health clinics, emergency service facilities and electric and telephone service. We promote economic development by supporting loans to businesses through banks and community-managed lending pools. We offer technical assistance and information to help agricultural and other cooperatives get started and improve the effectiveness of their member services. And we provide technical assistance to help communities undertake community empowerment programs. We have an $86 billion dollar portfolio of loans and we will administer nearly $16 billion in program loans, loan guarantees, and grants through our programs. Rural Development achieves its mission by helping rural individuals, communities and businesses obtain the financial and technical assistance needed to address their diverse and unique needs. Rural Development works to make sure that rural citizens can participate fully in the global economy.

Now you may think, based upon that description that this is a program only for farms and farmers. Not so. Much of Oakland County qualifies as “rural”, even in places like the Village of Milford or Highland. I recently represented a home in Highland, in a neighborhood on White Lake where the buyers qualified for a USDA RD loan. And the best part, these loans still qualify for almost no money down and have great interest rates.

You should go to the USDA Rural Development Web site for more information. You’ll have to establish and account there to get the full information on the program and to see if the area that you are looking in qualifies. This may even be a better program for you than an FHA loan. Go there and check it out. If you’ve got to get a loan, if might as well be a USDA Choice loan through the Rural Development program.

Sunday, November 9, 2008

Boom times for turn-around specialists...

From a recent Realty times article come this story - The economy may be flat and the housing market generally in the tank, but it's boom time for investors who know how to buy houses at fire-sale prices, fix them up and sell or rent them out. It's also boom time for the companies that can supply those investors with financing when they need it.

"This is an absolutely wonderful market environment to be in," says Frank Sharp, who heads Watershed Renovation Capital, in Alexandria, Virginia. Sharp's company specializes in funding real estate turnaround investors -- people who know how to acquire distressed properties, mainly houses, and reposition them quickly. Watershed provides short-term acquisition and rehab financing to investors at so-called "hard money" rates: 12 percent for the first three months, 14 percent for the next three months.

Meanwhile, the biggest corporate player in the residential turnaround real estate field, Dallas-based HomeVestors of America -- best known for its "we buy ugly houses" ads -- is also having a banner year. Not only are its 230 franchisees doing record volume, but the company has begun accepting "associate franchisees" - investors who can only devote part of their work time to real estate. Associates and full franchisees invest directly themselves, buying distressed real estate at an average 40 to 50 percent below market value, fixing them up, and either selling or holding them as rentals.

A key feature of the HomeVestor program, according to vice president Jason Killough, is the availability of proprietary, short-term money to acquire, fix up and resell houses. But HomeVestors doesn't just give that money away: It charges a hefty 14 and three quarters percent for the first six months -- and expects most franchisees and associates to get the job done by that deadline. Short-term turnarounds are the norm, said Killough, because "our objective is to move that house" -- at a quick profit to everyone involved. We have a couple of fairly successful entrepreneurs doing this in the Milford area.

While these are boom times for the pros in this business, it is also a time of huge risk for the amateurs. I am seeing more and more homes that were bought out of foreclosure by would-be house flippers and which are now in foreclosure again. Those novice-time investors often great underestimate the time and money involved in fixing up the place and often don’t have the contacts within the building trades to get good deals on materials and labor on the needed work. Somehow, they go into this venture thinking that it is a weekend-work thing that they can do themselves. Wrong!

It’s sad to see a house that has been foreclosed for the second time in the last year, sitting there half finished, in terms of fix-ups. You don’t know whom to feel worse for – the original owners who lost it or the novice would be fixer-upper, who lost it the second time. Often there is an untold story about the second home that is now in foreclosure –that of the would-be fixer-upper who over-mortgaged their own home to get the funds to fix up the home that they hoped to flip. That’s just plain sad!

So, if you have the skills and contacts and extra money to be able to afford to take the risks involved, these are great times for real estate investment opportunities. If you are missing one or more of those requirements, please think twice before jumping into this game. You could lose more than your investment in the fixer-upper house.

Friday, November 7, 2008

Unemployment driving foreclosures now.

From a recent CNN Money report on the real estate market comes this report. As the economy tanks, unemployment is the major factor driving a much larger proportion of foreclosures now than in the earlier stages of the mortgage meltdown, when bad loans were primarily to blame.

In June, 45.5% of all delinquencies reported by Freddie Mac (FRE, Fortune 500) were due to unemployment or the loss of income, according to the company. That's a rise from a level of 36.3% in 2006.

"The two economic factors that most contribute to foreclosures are falling home prices and rising unemployment," said Richard DeKaser, chief economist for National City Corp (NCC, Fortune 500). "It's hard to pay your mortgage when you don't have a job."

And that's a situation that more and more people are finding themselves in. Nearly one million Americans have lost their jobs so far in 2008. The Bureau of Labor Statistics reported in early October that 159,000 private sector jobs were lost in September, and on Friday, economists expect the BLS to report that 200,000 jobs were lost in October.

"The rise in job losses will increase and extend the delinquency trend," said Doug Duncan, the chief economist for mortgage giant Fannie Mae (FNM, Fortune 500). Foreclosures spiked 71% in September alone according to RealtyTrac.

A double whammy

Of course the housing crisis is driving unemployment which in turn has exacerbated the housing crisis - particularly in bubble states like Florida, Nevada and Arizona.

The unemployment rate in Florida was just 3.3% in May 2006, when the subprime crisis began to emerge - far below the national average of 4.7% at the time. Today Florida's rate stands at 6.6%, well above the current national average of 6.1%. And, Michigan leads the nation with an 8.7% unemployment rate at the end of September.

The employment issues in Michigan are driven by the automotive industry, which is in such sad shape that there is open talk of one or more of the local auto companies going out of business. Hopes now hang on a federal bailout and a merger between GM and Chrysler.

In our area the UAW auto members who fueled much of the housing boom are now experiencing life without much overtime and layoffs that likely impact 1 in 10 families, when supplier layoffs are added in. Not only aren't they buying any more, but many are in the process of losing the homes that they bought in better times to foreclosure. And all of those automotive execs who used to provide a buyer pool for upscale, move-up houses - forgetaboutit!

So 2009 is shaping up to be the year of the layoff foreclosure. Whatever causes them, foreclosures will continue to put downward pricing and value pressure on the market. It doesn't really matter if the bank is willing to rework the loan or if the Feds programs provide for new lower rates; if the homeowner doesn't have a job, anything above a zero payment is likely out of the question. WE NEED JOBS IN MICHIGAN! Then we can worry about real estate.

Thursday, November 6, 2008

Going green ideas...


No, this is not a commentary on our country going down the toilet. From my Iconoculture news feed comes this story of a new “green” product for smaller, cramped bathrooms.

Australian company Caroma created Profile, a product that unclutters the bathroom by combining the toilet and sink into one fixture with hand-washing happening on top of the tank (see more about the products from this company at SaveWater.com.au)

The dual purpose product has another benefit — it reduces water waste. It's unique design channels the water used during hand washing into the water used for flushing. This creates water savings of more than 70% compared to an 11 liter single flush toilet.
The Profile functions as a normal toilet, so no additional installation needs are required.

OK, so, the two-in-one toilet/sink combo might be met with some skepticism from U.S. shoppers, but it does create an efficient solution for homeowners who want to lower the water bill and lessen their impact on the earth.

As consumers create demand for smaller homes, appliance and fixture brands will need to provide innovative space-saving products. For a whole Web site that is dedicated just to products for getting organized and saving space, click here. And for more tips and products that will help you save water, click here.
The point here is that we must as a nation and a society accept the limitations that we will be living under in the future and embrace technologies, as well as changes in lifestyle, that will allow us create a sustainable environment. The choices are as simple as finding ways to conserve water vs. finding ways to live without water. Pretty much a no-brainer.

Wednesday, November 5, 2008

So, what now?

A little jingle has been running through my mind this morning, to the tune of the song from the Wizard of Oz about the witch being dead, as sung by the Smurfs who inhabited Oz.


Ding, dong the Bush is gone,
Which old Bush? The 43 Bush.
Ding Dong the 43 Bush is gone.

George W. will likely go down in history as the worst President that we've ever had, certainly the worst two-term President. But that is for the historians and apparently most Americans can't wait until he's officially history.

So, then the question becomes, "What now?"

It's apparent that President-elect Obama is inheriting the Bush recession, as well as the Bush wars; so he will immediately be plunged into a crisis management role. I believe that his measured and thoughtful style will serve him well in that role. It will be refreshing to see and listen to someone who actually thinks before he speaks and doesn't always have that annoying little smirk on his face that Bush exhibited all the time

But, enough about the past. What about the future? We are likely headed further into recession and there is little that a newly elected President can do about that, other than do the things that are available to him to shorten the length of it and hopefully reduce the depth of it. At least he will have a cooperative Congress to work with as he seeks solutions to the morass that we find ourselves in right now.

On the local real estate scene things are really more dependent upon what happens to our auto industry than anything else. All the talk of an auto industry rescue and of a merger between GM and Chrysler still cares with it warnings about huge layoffs. If we are hit with 20-30-40,000 layoffs locally the impact will be devastating and our housing swoon will continue for years to come. Let's all hope that doesn't happen.

The bottom line for what's happening in Michigan is a fundamental reset of our economy and a huge net loss of population that is just beginning to unfold. We may not have to build another new house for a decade, if we lose the number of people that are projected to leave Michigan in search of jobs elsewhere. Perhaps, if the value loss continues in our housing stock, we will see private home ownership become so attractive that people in apartments and mobile home parks will take up the slack; however, the credit market will have to ease up quite a bit for many of them to qualify for even a low mortgage amount. Let's hope.

But, today is a new day, filled with Hope for Real Change; so let's sign our ditty about the mean old Bush being gone and hope that the Wizard who just came out from behind the curtain can help us get back to the America that we call home. Let's hope so.

Tuesday, November 4, 2008

NAR challenges Congress to Act, Now!


From a recent NAR press release comes this story. The NATIONAL ASSOCIATION OF REALTORS® has stepped up its challenge to lawmakers encouraging them to take new, decisive actions to address the continuing problems in the housing industry, as well as the ongoing economic crisis. NAR sent a letter in October to U.S. Treasury Secretary Henry Paulson, calling on him to refocus the Federal Housing Finance Agency’s efforts on restoring strength to the mortgage-backed securities market, which would help lower mortgage rates for all home buyers and for those who need to refinance.

Last Friday NAR provided an economic analysis demonstrating that a reduction, or a buy down, of interest rates by just 1 percentage point could result in up to 840,000 additional home sales and reduce the inventory of homes by as much as 20 percent. Inventories currently at 9.9 months’ supply would decrease to approximately a 7.5 month supply.

“These changes would help stabilize home values and the housing industry,” NAR President Richard F. Gaylord says. “The Treasury Department has gotten off track by focusing too much attention and stimulus money on Wall Street and banks that are in turn using the money for mergers and acquisitions. The administration needs to get back to the original intent of the plan – stabilizing the mortgage and housing markets – to help families avoid foreclosure."

Home price stabilization would bring clarity to the valuations of mortgage-backed securities, removing uncertainty in the financial markets and positively affecting the overall U.S. economy, Gaylord says.

A recent consumer survey conducted by NAR member Realogy Corp. reinforces the importance of housing in a broader economic turnaround. The survey found that nine out of 10 home owners believe that owning a home is still the best long-term investment they can make, but nearly one-third of those surveyed said they were putting plans to buy a new or existing home on hold because of the current economic environment. In a related survey, nearly half of all brokers surveyed said that they would expect sales to increase 10- 25 percent if 4.5 percent mortgage rates were available today.

Realogy President and CEO Richard A. Smith says that substantially lower mortgage rates would stimulate both existing- and new-home sales. “When home sales increase, housing-related consumer purchasing follows, and we would expect this to help lead our economy to a recovery,” he says. Both NAR and Realogy have called on the federal government to take corrective actions that will result in lower mortgage rates.

Federal Deposit Insurance Corp. Chairman Sheila Bair has presented some ideas aimed at helping millions of home owners by guaranteeing their mortgages. “NAR would support this effort,” Gaylord says. “The government must focus on protecting home owners and making the dream of homeownership once again attainable. This would help stabilize the housing market and strengthen the national economy.”

Toward this end, NAR submitted a stimulus plan to Congress and the administration earlier this month, calling on Congress to enact a new housing stimulus package that would help boost the economy. The plan includes consumer-driven provisions that would eliminate repayment of the first-time home buyer tax credit and expand the credit to all home buyers, make the increased mortgage loan limits permanent, and focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached.

Reducing the interest rate, combined with removing the home buyer tax credit repayment, would result in an additional 10 percent reduction in inventory, down to a 6.5-month supply, and would produce modest home price gains of 2 to 4 percent. Such price gains would provide up to $760 billion in housing equity recovery for the nation’s 75 million homeowners.

As a Realtor® and NAR member I support these suggestions and hope that Congress will refocus upon saving homes and home owners and not just big banks. I understand the argument that we need to get the banks lending again, so we obviously can't shift 100% away from helping them, too; however they may find themselves in a position where they are ready to lend again and there is no one left to borrow, if they let too many homeowners go into foreclosure or worse.

Monday, November 3, 2008

House not selling? Maybe it's bad Feng Shui.

If your house isn’t selling, maybe it’s suffering from bad Feng Shui. At least that’s the theory of Feng Shui practitioners. Feng Shui is the ancient Chinese “science” dealing with the environment that we all live in and how the various elements in that environment affect things and us. While I am somewhat skeptical about labeling it a science, I do believe that thousands of years of observing human reactions to our surroundings have resulted in Feng Shui practitioners being able to give good advice about what makes the environment “more harmonious” for people and thus makes your house “feel” better to potential buyers.

When all elements are in balance, they create harmony, peace, and balance to attract a buyer, according to Feng Shui expert Suzee Miller. Such positive energy is better known as chi. When elements are harmonious, chi flows gently and peacefully. When they are out of balance, chi flows out the door or stops dead in its tracks. The flow of chi is essential to the personal comfort and well being of occupants and buyers, whose bodies pick up balance and imbalance, suggests Miller.The idea behind Feng Shui is to create an environment that is harmonious to the occupant (and buyer), and to support health and good fortune of occupants due to placement of objects, use of color, landscaping, and the use of the five elements—fire, earth, metal, water, and wood.

The philosophy can be carried forward from clearing a space to build on a property, to exterior and interior design, to furniture placement, decor and more. For example, a green front door and brown doormat are earth. To help a listing sell with a green door, create balance with a red wreath (fire) and a black doormat. Also put a fountain by the door (water).Some homes seem to sell without any help at all, while others languish on the market. Among similar homes, why the difference in buyer interest?“The energy is moving too fast,” explains Miller. “Wind we can’t see but we can’t discount its presence. Water is visible, so with a balance of the invisible and visible, when you open a door, the invisible chi moves too fast and comes through the doors. All you have to do is place a sofa or ficus tree to slow down the chi. When we slow it down, it becomes gentle and soft and flowing, and the buyers will stay longer, and they fall in love with the property

Another suggestion—try to have the five elements visible in every room. ” Also, do something about long straight walkways or hallways, which Miller calls “poison arrows,” for their ability to escort chi out the door. “Chi likes to meander like a stream,” Miller says. “When it moves too fast, buyers are in and out fast, too, and they don’t stay and write offers. So slow the chi down with a table or a potted plant. On a walkway, stagger some potted plants.“The simplest way to look at it, is that if any element is out of balance or missing, we feel off balance, too,” Miller says. In fact, Miller believes that Feng Shui principles can overcome just about any environmental negative, except one. “No house will sell if it is overpriced,” she says.

There are many Feng Shui books and even expert practitioners that you can hire, right here in Michigan, if you think your house may have bad Feng Shui that is preventing it from selling. Of course, don’t forget my 3-C’s of real estate too – Clutter, Cleanliness and Condition. Even if you have Feng Shui going for you, buyers will still be turned off by a cluttered, dirty house that has lots of maintenance issues. Maybe I should make that the 4-C’s – Clutter Cleanliness, Condition and Chi. Of course let’s also not forget the advice about an overpriced house, which reminds me to also mention the importance of the 3-P’s of real estate – Price, Patience and Perseverance. In today’s market you need those three more than ever.

Sunday, November 2, 2008

We've fallen and that's good...

PMI Releases fall risk Index - We’ve fallen out of the top 20! The PMI Mortgage Insurance Company recently released it’s Fall 2008 Risk Assessment for major metropolitan areas I the US and Detroit fell out of the top 20 for the first time in a long while. That’s a good thing! This report shows PMI’s assessment, based upon local market factors, of the likelihood that property values will decline further in the metro areas that are reported. In Detorit’s case they lump Detroit, Livonia and Dearborn together and call that the Detroit market. About six notches below that market they also rank the Warren-Troy-Farmington Hills market. Detroit ranked number 21 on the report and the Warren-Troy-Farmington Hills market came in at #27. To read the entire report click here.

While this isn’t exactly earth-shattering news, any good news is welcomed in our current market. This also serves to reinforce what we are seeing in local statistics, which would seem to indicate that we have already bottomed out locally. We have seen local home values falling about 1% per month for the last 18 months; and, that was on top of declines that had already occurred. Values overall are down anywhere from 25-40% from the peak, which most agree occurred in the 2004-2005 time frame. As bad as it is for long-time owners to deal with, the loss in values is even worse for those who bought at the peak. That was also a time of very easy money and loose lending practices; so many of those buyers ended up financing 100% of the purchase, usually with two mortgages. Now those home owners are discovering that they owe far more than the property is worth, so they can’t even refinance. That is critical because a lot of those easy-money second mortgages were ARMs (Adjustable Rate Mortgages) that are now resetting to much higher rates and forcing some into foreclosure.

The other shoe that is dropping on many regular sales (not foreclosures) is the “doesn’t appraise” shoe. Just in my business, 3 out of 5 of the last few sales that I’ve made have had that problem. It doesn’t matter if the buyer and home seller have reached agreement on a price for the property, if the appraiser doesn’t reach the same price or more the sale likely isn’t going to take place (at least not at the contract price). Appraisers have been told by the banks to view Michigan as a “declining market” and to take about 5% off of their appraisals to compensation for the bank’s increased risk. Fannie Mae and Freddie Mac stopped that practice a few months back, but other mortgage lenders have carried it on. What usually happens when that occurs is a re-negotiation of the sale price, sometimes with both sdies kicking in, but most often with the seller having to eat the loss.

So, maybe this good news that we’re no longer in the top 20 value-losing markets will help get things stabilized in our market and give regular sellers more of an opportunity to sell. We still have to work off the excess foreclosure inventory, but that’s happening at a fairly fast pace, so maybe by next spring we’ll be back to “normal”; whatever that means any more.

Saturday, November 1, 2008

Owners Still Optimistic About Their Home Values

Wow, you talk about looking at the world thorugh rose colored glasses. This story from a recent Zillow.com report says that many home owners remain doubtful that their homes have lost value in the current financial downturn, according to a survey of home owners conducted by Harris Interactive for Zillow.com.

About 49 percent of those surveyed, down from 62 percent at the end of the second quarter, believe that their own home’s value has increased or stayed the same over the past year.

Home owners in the Northeast were the most optimistic with 56 percent believing the value of their homes had stayed the same or risen. Slightly fewer—53 percent—in the South had similar attitudes. Westerners and Midwesterners were more pessimistic with 48 percent and 35 percent respectively having that perception. At least the midwesterners are realistic, perhaps from having been inundated with bad news stories in teh press and on TV.

Other key results from the survey include:

- 50 percent of those who say they support John McCain and 56 percent of Barack Obama supporters believe their home values decreased over the past year.

- 3 percent say they plan to sell their home in the next six months, down from 5 percent last quarter. Another 3 percent say they plan to buy a home, down from 4 percent in the second quarter.

- 53 percent are planning either major (such as replacing the roof or remodeling the kitchen) or minor (like installing a new garbage disposal or painting) home improvements next year. Of those, 47 percent plan minor improvements and 15 percent plan major improvements.

So, hope does spring eternal or at least disbelief springs eternal. Maybe if we click our heals together three times and say "my house didn't go down, my house didn't go down, my house didn't go down" things will be as they were. We'll all wake up and find that this was just a terible nightmare and we're all safe now with Auntie Em and Toto. To see the entire story abot the Zillow.com survey, click here.