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Tuesday, July 31, 2007

Time to get out of the rut

I just finished my August newsletter, which goes out to about 350 people every month. In this issue I did an article about steel framed houses. Last month I did one on concrete houses and last year I did one on timber framed houses. All of these building techniques are ones that we don't see much around Michigan. we get a fair number of timber framed, post and beam houses, but few, if any, concrete or steel framed houses. That's got to change fairly soon, because we're fast running out of wood in the United States. In fact quite a bit of the wood in our homes now likely comes from South America. That's one reason why steel framed houses cost less to build than wood framed houses.

So why aren't people switching to steel framed houses or concrete or any of the other alternative building materials. I suspect it's mainly just momentum with in the builder community. They've all grown up with wood framed, stick-built houses and that's really all they know, so that's all they build. Until the wood runs out or their customers start asking for something different that's what they'll build. What gets me is that both articles on concrete and steel-framed houses has many, many points about how superior both are to wood framed houses in terms of energy efficiency, safety, longevity and more. True, concrete homes did appear to cost a little more, but the steel framed houses actually cost less.

So why are consumers asking for them? they don't know about them and the builders sure aren't going to tell them and upset the current apple cart. Builders out west and down south have embraced these new building techniques and materials as a way to overcome pressing issues in those areas - storms and earthquakes and termite problems to name a few. Steel and concrete building withstand the hurricanes and earthquakes in those areas better than wood buildings. We don have those issues. We do have termites, but not to the extent that they do down south, where that is a major problem in some areas. even so, if someone can build you a stronger house that will last longer, be less impacted by fire and cost less to build, why would you not buy it? Well then inquire about a steel framed house when it comes time to build. Get our of the wood house rut!

Monday, July 30, 2007

The silence of the lambs basement

I use a running joke with customers about the "Michigan basements" that many of our old houses in the Village have (I have one, too). It's that we're about to go to the "silence of the lambs basement" when we start down to the basement under an old, historic house. I actually picked that up from a customer a few years back. We got down into the basement of a historic house and she commented that it was spooky, like in the movie "Silence of the Lambs". And so it is. Many of these old basements still have dirt floors or at least dirt crawl spaces in addition to whatever concrete flooring has been put in over time. Some (mine included) still have cisterns - large holding tanks (think of the deep pit in the movie where the lady was kept) in the floor or built above the floor, where run-off water from the roof could be stored. I have a large square holding tank in the middle of my Michigan basement.

Many, if not most, of these old basements are largely unused, except for storage. Some have the laundry down there, but most just house the mechanical for the house - the water softener, the water heater and the heating and cooling systems. Except for the occasional trip to refill the water softener tank, there is little reason to go down into most of these "dungeons". So, spider webs build up and when you do go down there you end up walking through them - always a "special" experience, especially for women. Of course, they do have great value as disciplinary tools with grandchildren. One trip to the dungeon and a few stories about little children sent to the basement who never returned and you have a rather effective deterrent (not that I would ever do that, of course) for little Billy or Amy.

One fascinating aspect of many of the basements of the older historic homes in Milford - homes in the 1830 through the 1860's range - is the number that have complete tree trunks holding them up and acting as the main cross-members under the floors. People are surprised to see actual tree trunks, bark and all, in the basement. These were often not cut or hewn in any way, other than to be notched for better fit; so, they are readily recognizable as tree trunks. That surprises and fascinates most Americans. But, if you take an Englishman or most Europeans, through they find it relatively normal. One has to remember that a house built in the 1800's is relatively new, compared to homes in Europe and in England.

You can also get a good feel for the progress of the house over time, as the home was expanded and changed. You can usually see the original foundation (rocks, sometimes just stacked and sometimes filled with mortar, for the original foundation)and any newer additions (progressing through concrete block walls and on to poured concrete walls). Since some of these older homes have been added onto many times, the basements are like a timeline for the house. In a few, rare cases, some owner, sometime has paid to have the whole house jacked up and a modern basement put underneath. The house looses some of its character, but at least it gets a useful basement.

So, the next time that you visit a Michigan basement in a historic house, remember the Silence of the Lambs and see if you get a bit spooked, too.

Friday, July 27, 2007

Feeling like Joe

Every now and then I get feeling a little like Joe Btfsplk. You remember Joe Btfsplk don't you? Well if you're over 50 you might. Joe was the little cartoon character in the Li'l Abner cartoon who walked around with the dark raincloud always over his head. In the cartoon he was billed as the unluckiest man alive. I don't really feel unlucky. In fact I feel blessed. I have a great life with a wonderful wife in the best little town in America - Milford, Michigan. But, I do occasionally feel that people view me as having the dark little cloud over my head when we discuss the value of their homes. I have to be the bearer of the bad news that it's not worth as much in this market as they had hoped or that we need to lower the price again.

It's not easy or pleasant to tell someone who has lived in a home for decades that the only people who've believed that the home was appreciating lately are them and the local tax assessor. We haven't had any real appreciation since the 9/11 terrorist attack and in fact the values have dropped over the last 2 years. so now people are finding that a large portion of what they believe was their "nest egg" is not only not going to hatch as they thought it would, but it's starting to smell a bit and might have gone bad.

So, in walks Norm with the Comparative Market Analysis (CMA) that shows the home to be worth $40-50,000 less than anticipated (sometimes even more) and they start seeing me as Joe Btfsplk, with a dark cloud above me head. Needless to say, I get a lot of silence or mumbling under the breath when I present these CMA's. Often I'll get a polite thank you and be shown to the door.

Sometimes I'll see the house listed later by some other agent, for some ridiculous high price. That used to really bother me for two reasons - the home owners were still deluding themselves about what they could sell the property for, and, the agent who listed the house was going along with ruse just to get a listing, which they knew would have to be reduced big-time to sell. That's pretty much SOP for some agents. They know going in that the house is overpriced, bu they figure that they'll let the home seller stew on the market for awhile and then talk them into lowering the price to a competitive level. A more honest agent would stand firm in his/her convictions and walk away from the listing rather than add another overpriced home to the already bloated inventory. But, hey; that's just me, the guy walking round with the little dark cloud. Let me hear from you.

Wednesday, July 25, 2007

A housing void that needs filling

Of the 28 buyers with whom I'm currently working (a loose term that is inclusive of everyone that I'm doing searches for and to whom I send listings), at least half are looking for the same thing - affordable housing. They have me searching in the $100-150,000 range, usually for 2 or 3 bedrooms with 1 or 1 1/2 baths. Usually they say that they would like 1,000 Sq Ft or more. The thing is that there are very few houses in the immediate area around Milford that fit those criteria and that are decent. There are a number of "dumpster queens" (houses that you would need to back a dumpster up to immediately and start ripping it apart to rebuild) and a few nicer, habitable homes in the Village and the surrounding area, but very few.

It seems that all of the builders went upscale (and now many went broke). In the 1950's and 60's there were subs built in Milford with affordable housing (let's just loosely define that as houses selling for under $200,000) - subs like Bonnie Highlands and Fairview Hills. I checked today and there were only 5 houses for sale in Milford for under $150,000. Most of the listings from the Bonnie Highlands and Fairview Hills subs are in the $150-200,000 range now.

A lot of this is understandable. Milford, at lease the Village of Milford, is pretty well built out. There are a couple of developments going on within the Village limits; but, they've apparently stalled out due to the economy and the fact that they too were aimed at the more upscale buyers - high $200K's and above. So what's a young couple just starting out to do? Where have all of the entry level builders gone and is there any hope that someone will fill the void?

I believe that both the builders and local governments have a role in solving this problem. I haven't looked at the zoning maps or the Master Plan for the Village or the township lately, but I suspect that there is little push for affordable housing (it might be listed under the stigmatized heading of "low income housing"). I certainly believe, based upon what I've seen people get permission to build on Village lots, that the zoning codes would not preclude placing lower cost modular homes on lots within the Village or Township limits; and that may provide a part of the answer. Of course standard lots (66 by 132 feet) themselves, within the Village limits, are going for anywhere from $70,000 to $110,000, depending upon location; so, that doesn't leave much for a house.

I could hear the collective groan when I mentioned modular homes, but quite honestly they most often better built than most of what's on the market at the same price point. There is a common push back that says that they don't "fit" into the look of the area; but that's mostly from snooty busybodies who fancy themselves to be the saviors of us all. You can buy modular homes with almost any look these days. Now, let me quickly state that I'm not pushing modular homes. I just don't see any local builders with any interest to put up affordable stick-built homes. The newest generation that is now entering the home-buying market can't afford the 2000+ Sq Ft, 3-car garage, granite gourmet kitchen, $250,000+ homes that they all want to build. Maybe a well-planned, likely fairly dense sub of nicely done modular homes would help these buyer get started. Just a thought. Let me hear from you.

Tuesday, July 24, 2007

The sound of one hand clapping

I ran into something yesterday that reminded me of that old zen standard about one hand clapping. I ranted here earlier about the little, 2-person mom & pop operations that abound in this business - "Two Clowns and a Sign". Yesterday I hit the penultimate implementation of that concept - the single person shop. This was like LookMaI'mARealtor LLC, the broker out on their own; in this case, specializing in the vast foreclosure business that's out there these days.

It really doesn't take much to set up shop as a real estate company - a place separate from your home (could be a timeshare with other businesses) where you can meet the public, have mail delivered, maybe have a phone system and you need a brokers license - another requirement that is fairly easy to meet. The increase in foreclosure business has encouraged this practice, since the broker/owner needs to DO almost nothing. They get the place listed in the MLS and stick a sign up. Most of these operations do it for very little commission. That's how they curry favor with the banks and mortgage companies.

What I found amusing yesterday (actually very frustrating at the time) was trying to schedule a showing appointment through one of these little outfits. I got this important sounding message when I called the "office" - "All of our agents are busy assisting other clients, please leave a message ..." What a hoot. I may put that on my home office voicemail service. Once all of the agents stopped being busy with other clients, I got a call from The owner/broker/agent/chief cook and bottle washer. I eventually got the appointment and showed the house. Since it was a bank repo, it was in fairly rough shape, but my clients expected that and may still try to do something with it.

So, it you're out driving around looking for houses and see a sign with some strange sounding name for the listing real estate company; especially if it has LLC after the name, be prepared to deal with the sound of one hand clapping and one person trying to pass themselves off as a company. to get the service that you probably expect, go with an agent from a known company or franchise. They'll have to deal with the one hand clapping issues, not you.

Monday, July 23, 2007

Another peaceful afternoon

I held a house open this weekend, which meant that I got to spend another peaceful afternoon watching television, uninterrupted by the need for human discourse. Open houses have been terrible lately, just another sign of the times in the real estate market. The last 4-5 open houses that I have held probably drew a total of 6 people, with several having no one.

Open houses have always been a mixed bag for Realtors. Many hold them in hopes of finding buyers that they can work with and that does work most of the time. Some hold them because the home owners insist that they do so. While I will admit that I have sold houses to people who came through on open houses, it is getting pretty rare. Most buyers are too busy to spend the day wandering around looking for open houses. About 1/2 of the people who've come through my recent open houses told me that they had actually found the house and the open house notice on-line first or they wouldn't be there. So, even open houses are benefiting from the movement to the Internet for information about everything. I normally advertise my open house on at least 5-6 sites on the Web.

I'm not sure that I'll do too many more open houses until the fall. On nice summer Sunday afternoons people seem to have better things to do than be inside, looking at houses.

Friday, July 20, 2007

Is it really work or just busy work?

Is it work if you don't get paid? In physics there is a definition for work that involves applying force that causes some movement over some distance and within some time frame. In other words you apply a force to something and it moves so far in such and such amount of time you have done "X" amount of work. The idea is that if you applied force all day long and the object never moves then you haven't actually done any work. Sometimes I can end a week in the real estate business and feel that way - that I've been applying all of my marketing and sales skills and yet nothing has happened. I sometimes ask myself - then have I done any real work? I know that I have gone to work every day and that I have worked for 10-12 hours each day, accomplishing things that seem to need to be done; but, at the end of the day and week, if nothing has sold or no new listings have been added, have I really gotten any work done? In the end, if I don't get a paycheck, do all of these things that I've spent time on constitute work or do they just take up time.

Of course, I normally snap out of this philosophical quagmire and acknowledge to myself that the things that I spend all of this time on (at least most of them) are important to the business. They are things like keeping fliers out in front of the homes, keeping the MLS and other Web sites updated, providing feedback to the owners and much more. All of those things are necessary to keep the business going. So, I did do work and I will eventually get paid for it. The real estate business is just one of those where the rewards are often delayed.

Thursday, July 19, 2007

Beware the Handyman

In an earlier posting, I commented on the damage that the handyman homeowner can do to the value of a house, if he/she is, in fact, not all that handy or lacks the tools and training for the job. The same is true for the "for hire" handyman. You've seen those signs posted on telephone poles or ads in the local paper for a handyman, which can supposedly do all sorts of odd jobs around the house. Well the same warnings apply to these commercial versions of the handyman homeowner.

It's likely OK to hire a handyman to change a light bulb or clean out your gutters or do other odd jobs around the house that don't require a great deal of skill or specialized tools; but, think twice before hiring them to do a big job. Handymen aren't licensed. In most cases they aren't specifically trained in areas like electrical work, plumbing, tile work, roofing or other jobs for which a builder-professional should be used. A good rule of thumb is again that any job that requires a permit to do should not be given to a handyman. There are jobs that don't require permits that are also just too big or too prone to mistakes that they should not be trusted to someone who has graduated from working on his on house and now wants to do yours.

I've seen interior wall and ceiling repairs butchered by handymen and roofs that look terrible down by handymen (a second coat of shingles job often does not require a permit). Handymen have also wired plugs wrong or left leaking pipes behind on plumbing jobs. so, hire the proper professional for those more important jobs and leave the smaller things that you could likely do yourself, if you had the time, to the handymen of the world. Also remember to ask the handyman to prove to you that he has insurance coverage. If you hire hm to get up on your second story roof to clean the gutters and he falls off, you don't want to be responsible for his health care. Hiring a handyman is only about a half a step above asking a neighbor to help you with something. In neither case are you really sure what you're getting, ,but it's usually cheap.

Wednesday, July 18, 2007

Moving futher into the I-world

I have just about completely given up spending on print ads. Occasionally I'll do one if I can come up with a catchy theme that might draw some attention. The truth is that, except for providing the sellers with something int he paper that they can show friends and relatives, print ads have done little to sell houses, at least for me.

So, what am I spending on to advertise and market the houses that I list? Mainly I spend on the Internet. I've mentioned here before that I run three real estate oriented Web sites -, and . I do multiple picture presentations and virtual tours for every listing and I pay extra to get what are called "enhanced listings" on, the premier Web search site for real estate. I looked into Pod casting, but didn't see enough use of that yet to provide any payback. Obviously this blog is real estate oriented too, though admittedly not much of a vehicle to advertise my listings.

Based on feeds of data from my local Multi-List Service (MILS) and from my company (Real Estate One), my listings currently get "pushed" out to over 120 Web sites - everything from large national sites like and to local sites like, and Through those sites our listings are seen by over 1 billion unique viewers each year. Surely one of them wants to buy the houses that I have listed. Our own company web site has now grown in viewer hits to over 85,000 unique visitors a month.

The National Association of Realtors (NAR) has tracked the consistent rise of the use of the Internet for home hunting by buyers. The statistic now stands at 89% of home buyers who claim to have found their home first on the Internet. So, I'm going (and spending) where the buyers are, not where the people who just want to check the sports stats or read the funnies go. I'm trying to figure out what's next in this arena. It appears to be video; but, Podcasasting was also being tauted as the "next big thing" a while back and just didn't take off. I can see video gaining some traction. The real estate world is very visual and people like to see the houses. NAR statistics show that listings with multiple pictures and virtual tours attract more than four as many visitors as those without pictures or with just a single picture. So, video should just add to the attractiveness; so long as it is good video and not a zoomy, blurry, shaky, home-video effort.

So, I'm off on a quest to find a good and inexpensive digital video camera. I'll likely need video editing software too. The opportunities to spend money in real estate just never end. Stay tuned for future reports on my venture into video.

Monday, July 16, 2007

Memories of The Little Rascals

When I was growing up there was a show on TV (yes we had TV back then) called Our Gang or sometimes The Little Rascals. It was a cute show about a bunch of kids and all of the trouble they got into. Every now and then the gang would need or want to raise some money, normally to help out some poor widow who was about to be evicted from her home or for other good causes. Invariably, someone would suggest - "Let's put on a show!" Then one of the other characters would chime in - "I'll get us a stage." Another would shout "We'll get together a band." And so would begin an episode in which the whole gang participated, some as the stage hands and some as performers (either in the band or on stage). Of course in this little show everything came out alright and the day was saved for the poor widow.

I think of that old show whenever I work with young, naive buyer who are out to invest in real estate, with the thought of "flipping houses." It's like - "We'll buy a fixer-upper" and "You do the painting. I'll do the repairs. We'll make our fortune" Most of these young innocents have no idea what they might be getting themselves into and most do not have the capital or the skills to really take on the challenges ahead. Unfortunately, many learn that the hard way, with the end result adding yet another foreclosed property into the current mess. Of course they have also damaged their credit along the way, many maxing out credit cards to buy the paint and materials to fix up the place. The lucky ones break even and a few might even turn a small profit.

So, what am I to do when facing one of these young entrepreneurs? I try to provide some counsel on the risks and size of the task ahead. I have lots of information on my Web sites and about investing in real estate and about buying fixer-uppers. There are pages that show what the paybacks are from various updates and upgrades to a house and lots of artilces on the pitfalls of real estate investing. I try to provide educational information, without being so negative that it would turn them off to working with me. The truth is that real estate investing for the little guy is a very tough, very risky business. Yes, it can also be very rewarding; but you have to have the wherewithal to ride out a longer than expected sales cycle when you go to sell and the skills (or contacts) to get the necessary work done for reasonable prices that will still allow you to make a profit. It's not like Our Gang; it's real and it's your money and credit rating at stake.

Friday, July 13, 2007

Trying to stay updated

I run 5 Internet sites - 3 real estate oriented sites, a site for the Milford Historical Society and a site for my church. I'm not sure how I kind of added and accumulated sites, but I have. Now I have this blog site, too. It's getting to be more than I had thought it would be just to keep all of these sites updated. The church site is fairly static, with a once a month update and the Historical Society site is fairly random in terms of new stuff to post there (at least once or two things a month, normally). The three real estate sites are fairly different in their focuses, but still all three need to be kept up to date. Death on the Web smells a lot like state content.

So I find myself devoting many hours each day to just keeping things updated - adding content or updating things like prices of listings. Then there are the ancillary sites to mine that require attention. My listings appear on,with enhancements that I must keep updated. they appear also on the site, which again must be updated with any changes or open houses. I also post them on Craig's list, which expires every 90 days and requires a complete re-load every time. Then there's Open, to which I post all my open houses. So, you can see that just keeping up with the posting and updating needs of all of the sites can get time consuming. I also do all of my own virtual tours, which requires time to take the photos, edit them and then re create the tour itself. Tours must be updated too so the exterior pictures reflect the changing seasons. It just goes on and on. Still , it is worth it, since so much of the potential buyer pool uses the Internet so extensively to search for properties. I get lots of calls from people who have seen my listings on one of these sites and want to see the house in person. That's what it's all about.

Wednesday, July 11, 2007

Spreading the pain around

I'll deviate from my normal real estate orientation in this post to share a recent experience with our homeland security forces in action.

My wife and I went to Cape Cod for a wedding last week. The most direct route there and back is to transit across Canada, from Port Huron to Niagara Falls, New York. The trip there was uneventful and the wedding came off without a hitch. The Cape is nice this time of year, albeit a bit hot. It was the trip back that provided us with a glimpse of our homeland security forces in action.

At the Port Huron entry point we were informed that "the computer picked you for a random check" by the border agent at the booth. We were instructed to pull over to the side. there another agent asked us to get out and "go get in line". That already sounded ominous. We had been making fairly good time on the return trip and had high hopes of retrieving our dog from the pet boarding place; that is until this interruption to our trip.

The line turned out to be about 10-11 groups deep when we got there and quickly grew behind us. Most of the people in the line had likely been victims of the kind of profiling that goes on these days, since they all appeared to be of foreign origin, many dressed in obvious native costumes. It also became apparent very quickly that this checkpoint was both severely understaffed and poorly managed.

As time passed and I grumbled a bit, not so far under my breath, the gentleman ahead of me turned and told us that this was the 15th time in the last year that he and his family had been stopped for an interview at the border. So, I felt kind of silly for complaining about my one incident, even though it had now cost me my opportunity to get my dog out of the kennel.

As time passed and the line grew, it was obvious that the 1-2 agents assigned to interview people were overwhelmed by the task. there were 4-5 more agents wandering back and forth in plain sight, but doing little or nothing to alleviate the situation. A supervisor (I supposed) stuck his head out of his office a couple of times, but took no action to speed anything up. This was classic Federal bureaucracy in action - sort of a FEMA moment.

Some 45 minutes after we had been directed into line, someone finally came up with the idea to ask who in line was there because of a random computer check. Apparently there had always been the opportunity to process those instances quickly, since all that was needed was to check the car out and ask us to fill out a declaration form. Our car had already been checked and we had nothing to declare, since we had not even stopped in Canada. So, 10 minutes later we were on our way, now way to late to get our dog.

I'm certainly not one to say that security at the border isn't needed. It is. And, I suppose that random computer checks are needed, too. But, if the border guards are going to create the delays that ensue from these random checks, they certainly need better systems, better management and perhaps more agents on duty to provide better customer service - a better experience for everyone entering the United States.

I also have more empathy for the people of foreign origin who are constantly profiled and must endure much more than random computer checks when entering the US. Another thing that was apparent from my experience was the issues that are created by language problems when people of foreign birth are stopped for questioning. Not only did the border agents try to use the good old American solution for a language problem (just keep raising your voice in hopes that saying the same things louder will somehow magically get through), they also were fairly oblivious to the issue of someone not understanding specific words or phrases in English that might not translate well into another language.

I'd be tempted to take a longer route should I have to go out that way again, just to avoid another experience at our border.

Wednesday, July 4, 2007

Saddly Neglected Homes

I accompanied a buyer couple to see a foreclosed home last night and what a sad sight it was. I was actually expecting what we ran into, but it still hit me as sad that such a once nice home had fallen into such disrepair. Foreclosures are rampant right now in Michigan and this home is just one example of what happens to them when they go into foreclosure.

This house was last sold to an owner for $375,000. Now it is listed for just over $200,000. It is bank owned and being "cared for" and marketed by a repo specialist company. I say "cared for" because it was obvious that almost nothing is being done to keep the place up. ratter it is just being marked down to reflect the poor condition of the house and grounds. From what I can see in public records, the house has likely set empty for between 1 and 2 years.

The grounds look like they had been nice at one time. what happens when they are neglected for that long is that nature reclaims the land, mainly in the form of weeds and saplings in what was a yard. At this point the whole yard would have to be plowed under and re-seeded or sodded.

Inside, the place is a mess. As I walked around it was obvious that all of the exterior doors had been kicked open at one time or another, likely by vandals or thieves. There was abandoned junk (personal belongings of the last owner) all over the basement and bits and pieces throughout the house. Plumbing problems, perhaps from frozen pipes or some other cause, had wiped out the kitchen ceiling, which had a half done (and poorly at that) repair job. Almost all of the carpeting had been ripped out and what carpeting was left now needed to be replaced. The walls and windows looked to be in fairly good shape and the structure still appeared to be sound.

Sometimes people who are foreclosed and evicted from homes take out their frustrations or somehow imagine that they are "getting even" with the bank by damaging the home. That didn't seem to be the case with this house. Sometimes either the ex-homeowner or thieves will strip out items of value - fixtures or plumbing items - and try to sell them. This home seemed to have everything in place, although there appeared to be a jetted tub installation in the master bath that had gone awry or been interrupted by the foreclosure process. It was just kind of sitting in the bathroom buy not installed.

As I walked though this place, I couldn't help but wonder about the people who built it. Where they still there when it was foreclosed? What happened to put them in such a condition. What happened to them afterwards. What about the kids (there were obvious kids rooms in the house)? What good times did this house see, what parties and birthdays and other happy occasions were celebrated here? And, what is to become of it now?

The young couple that I was showing through are looking for a foreclosed bargain house that they can fix up themselves. My counsel to them on this house was to get a good home inspector and have It inspected first, before even putting in a bid. A good inspection will provide them with a list of the things that will need to be done to bring this home back. This is not just a re-decorating project, there are some major and expensive projects ahead for this house. They may well be looking at $50-100,000 worth of expenses to bring this house back up to good, livable condition. That would still give them instant equity, if the market recovers and the house can be valued at more than $300,000 again. I think they were slightly overwhelmed at the size of the project and may keep looking for something that requires a little less work.

Tuesday, July 3, 2007

Let go of the past to sell

I've had (and have) several customers who just couldn't seem to let go of the past and come to grips with the reality that we face in today's market. As a result, their homes didn't sell. In most cases, these were folks who've been in the homes for years, some for decades. Most of them had been financially conservative, so they had either paid off the mortgage or had a very small mortgage left. You would think that they would be in the perfect position to be aggressive on the pricing of the home and sell it as quickly as they desired. Most were at transitional periods in their lives - newly retired or about to retire. Most had some form of retirement income or savings, but all had counted on their homes as a part (for some a big part) of their retirement nest eggs. Now when it came time to cash in, they found themselves locked into one of the worst real estate markets in decades. And most just couldn't let go of their expectations and hopes and deal with the reality that they found themselves inhabiting.

A part of what has caused this mindset is the myth that real estate values "always go up". We've lived with that myth for as long as I can remember. It got slow sometimes, but values always went up. Well, not any more. At least not in Michigan. We've seen home values drop in Michigan anywhere from a few percent to over 20 percent in the last 18-24 months. There really hasn't been any real appreciation since the 911 terrorist attacks. Things changed forever after that date and have been flat or going downhill ever since. What didn't change, and hasn't changed yet, is the relentless march upwards of the "assessed value" of homes and the resulting taxes - an unexpected result of the Headlee Amendment in Michigan. People kept seeing the annual assessors notification that their State Equalized Value had increased again, another 5% as allowed by Headlee, so they assumed that the market value was tracking along with that increase. It was not! Realtors haven't found any value in using the SEV as a pricing guide for 2-3 years.

So, here we are in 2007 and the prices are down again. What's a seller to do? First, decide if you really want to sell. Perhaps you HAVE to sell. If the answer to either is Yes, then find a good Realtor and let them do the research on what your house is worth on the market today. Don't start out by telling them - "This is what I have to get for the house." Quite honestly, the market just doesn't care what you want or need to get from the house. There is so much choice out in the market right now that buyers have become conditioned to very quickly by-pass and ignore any homes that they feel are overpriced. You have to be competitively priced, no matter what that number turns out to be. So, once the Realtor returns with their CMA (Comparative Market Analysis) and a suggested market price - listen to them! Don't say, "I hear you, but my house is worth more than that." No, no it's not. The Realtor makes no money just listing your house. He/she only make their commissions if they can sell it. An honest Realtor will walk away from an overpriced listing, rather than waste their time and money trying to market a house that obviously won't sell at the asking price. Some Realtors will take the listing, but they've already started writing the script for the price reduction meting with you in 30-45 days.

Second, get you head around the reality that the house you paid $60-80,000 for in the 1970's is not now going to bring you that $300,000 windfall that you had hoped to realize when you sold it. If the Realtor has informed you that $250,000 is the best that you might do in the market today, then start re-aligning your plans for that number, instead of setting your jaw and insisting that you get the $300,000. The old retort, "I'll find someone else who will list it for that", is just a charade played upon oneself. Even if you do find someone to list it overpriced, that means nothing to the market and it will just sit there.

So. let go and get on with life. Stuff happens and in this case it happened to the value you hoped was in your home.

Sunday, July 1, 2007

The Handyman Homeowner

Many homeowners fancy themselves to be pretty handy around the house and indeed many are pretty good at the minor maintenance tasks that come with owning a home. But, when the time comes to tackle a bigger job – maybe an update to the kitchen or bath or putting on a new roof or finishing off a basement – it’s time to take a real hard look at your skills and experience and think before you leap into those jobs yourself. Most people do those jobs for two reasons - 1. they plan on enjoying the results themselves for some period of time; and, 2. they think that the improvements will increase the value of the home, when it comes time to sell.

Certainly having a finished living area in a basement for yourself or your family to enjoy will bring you some joy and satisfaction while you’re there. But, if the job isn’t done correctly – electrical and any plumbing up to code, plumb walls, proper materials used – and/or isn’t done under the necessary permits, it can not only not add value to the house later, it may detract from the value of the house in the eyes of a potential buyer. If the buyers themselves don’t notice the less than professional job, certainly their home inspector will and will report it to them.

There is also a place on the Seller’s Disclosure that asks the seller if there have been any “structural modifications, alterations or repairs made without necessary permits or licensed contractors?” Some sellers try to interpret that line in their favor, by saying that finishing the basement did’nt modify the structure at all. It was, however, a very major “alteration” to the basement, as it existed when built, and thus should and must be reported on the Disclosure. Remember that the Seller’s Disclosure and the Lead-based Paint Disclosure are the two documents that you sign at the time of listing that can get you into legal trouble later, if it is shown that you misrepresented anything to do with the house.

Legal issues aside, there is also the impact that a do-it-yourself job can have on the perceived value of the home. Walls that are just a little off, corner molding that doesn’t quite meet at the corner, the use of door molding in place of floor molding, poorly trimmed or untrimmed roof shingles, electrical plugs of the wrong type or wired with the wrong polarity, use of the wrong type of vent pipe on a water heater, choice of the wrong materials for the job, popping nails or joint tape that shows through the paint - all of these things will be noticed by the buyers and their inspector and will cause them to pause and ask themselves what else may be wrong with the house because this marginally skilled “handyman” did it himself. You’d be surprised how fast a well meaning, but not well-trained, handyman homeowner can turn a $300,000 house into a $250,000 fixer-upper.

So what’s the homeowner to do to determine which jobs he/she should tackle and which to leave to the pros? A good rule of thumb to start with is this – if it normally requires a licensed professional and a permit, then you probably should’nt be tackling it. A second good guideline is – if it requires special tools that only a professional in the business would have, then, you probably should be doing it with just your home tools. You might be able to rent a tool that is just like what the pros use, but ask yourself, “why do I think that in my first use of this tool I’m going to be able to achieve a result that is as good as what the professional who uses it everyday gets?” I think you see the gist of this line of reasoning. That’s why there are professionals to do those jobs. They are beyond the capabilities of the normal homeowner and even beyond the skills of the very handy homeowner.

One reason that I feel relatively good about trying to write this piece and give this advice is that I’ve been there and done that. Everything on the “oops” list above I did to my first two houses. I look back on those days and ask – “What was I thinking?” I’ve always been pretty handy, but I’ll admit I’ve taken apart many more things that I ever got back together again. When I got into my current home, I tackled a few projects, the biggest being refinishing my hardwood floors. I did that only because none of the professionals that I had in would do it – the house was built in 1885 and the old floors are thin enough that they were worried about sanding off too much and leaving exposed nail heads. I ended up buying a belt sander and sanding it on my hands and knees (something that I won’t and likely could’nt do now). That job turned out OK, but there are areas that I’m not happy with and likely the next buyer won’t be either. I wrote off most of these as “adding character” to my old house at the time, but that will probably come back to haunt me.

When it came time to completely gut and redo the upstairs bathroom, I had it done. And when I wanted to put nice crown molding into two main rooms, I hired a very good carpenter. I had the electrical box redone and had a second box installed on the second floor – by professional electricians. I hired a professional plumber to put in a new hot water heater. I hired a builder to come in and replace my upstairs windows. And, all of the jobs that required a permit from the Village had one. I did lots of wallpaper removal, wall repairs and painting and other redecorating tasks, but I left the “heavy lifting to the pros. I’m still fairly handy, but I’ve learned how to recognize where my limits are and which jobs I should just not tackle.