We're down, but not out...

The report above is one of the tools that our company uses to keep us informed about the market and to equip us to better explain what’s happening in the market to our clients. This report, which compares the market in several dimensions year-over-year against last year is consistent with the press articles and newscasts about the market. It’s down! The number of homes being listed is down in some areas and the number that have sold year-to-date is down almost across the board – only Detroit and the Gross Points actually have more sold homes this year than last. The median home sale price is down across the board; with Detroit taking a big hit, due mainly to foreclosures. With the drop in prices comes some good news as the Average chance of selling a home in the next 120 is slightly up.

So what can you take away from a chart like this? If you’re in Oakland County, for instance (since that’s where I mainly do business), There have been 7% fewer homes sold this year and 4% fewer listed. The median home sale price is down 5% and the likelihood of selling in the next 120 days is unchanged at 19%. That’s certainly consistent with what I’ve been advising clients about the market. I generally tell sellers that they need to be ready for a 6-9 month sales cycle, maybe longer. I also advise them on market pricing, which is inevitably lower than what they had in mind. Homes are still selling – 7,244 in 2007 in Oakland County at the time of this report – they’re just taking longer to sell and fetching less than sellers had initially hoped.

Certainly one thing that the lay person reading this should take away from a report like this is that now is no time to be trying to go it alone. This is a tough market even for the professionals and a killer market for the unrepresented seller. Realtors are pulling out all the stops and using all of the tools at their disposal to get homes sold and still the sales are down. Imagine what chance an unrepresented seller has with no Multi-list presence, little or no advertising and essentially being invisible on the Internet. Talk about the proverbial snowball in hell. So, call a pro and then take their advice if you plan to sell in this market. If you've decided to sell using a Realtor, then follow their advice about getting the house ready and about pricing. See my posts of June 28 on the 3-C's of real estate and of August 14 on the 3-P's of real estate.

If you’re a buyer, be prepared to analyze new opportunities quickly and to be decisive when you find that great deal that you imagined is out there. I’ve had buyers hesitate for just a day and lose out on some great foreclosure homes. Be ready with a strong letter of pre-approval from your lender and use a Realtor to keep you on top of things in the market. It can take a day or two for a new listing to move out to the search sites that you may be using. Your Realtor can make sure that you hear about new listings that meet your criteria as soon as they hit the Multi-list. Be prepared also to spend the necessary money up front, even if you walk away, on an thorough inspection of any distressed house that you may bid on. It is far better to walk away from your $300-400 inspection investment than to take on a fixer-upper house with major issues that may cost many thousands of dollars to remedy.

Going green with cork...

The "Green building" movement is upon us and my new neighbors have embraced it by committing to cork flooring in their remodeling project for the kitchen and hallway. I'll be interested to see how that works out. Most of the cork that I've dealt with has been made into stoppers in wine bottles, but that's another story altogether.

Cork floors have been used for quite some time, especially in the commercial world. They reduce noise, insulate against both heat and cold, and are non-allergenic. With qualifications, it makes sense to bring Cork flooring into the home. In entrances it withstands years of dropped hockey sticks and spilled soft drinks. In kids' bedrooms, and family, music and rec rooms, Cork feels cozy to the toes.

Cork floors are perfect for the kitchen. Unlike ceramic tile, cork is comfortable to stand on for hours. It's more forgiving than ceramic (especially if you drop a plate or teacup), will not dent easily and, with proper surface dressing, resists scratches. The patterns and richly textured surfaces of cork floors also disguise dust and dirt. Modern cork flooring works with any décor. Dark natural tones enhance more formal settings, such as dining and living rooms. Lighter shades are great for the more casual look of a family room or play area.

According to an article on the GreenHomeGuide Website, cork floor are:

Durable - Natural Cork flooring is protected with 5 coats of durable UV cured acrylic finish. Sweeping and cleaning using a hardwood floor cleaner is all that is necessary for regular maintenance. A new coat of polyurethane will rejuvenate a tired floor that has begun to show signs of wear. Well maintained, your cork floor will last for decades.

Comfortable - Cork provides a comfortable cushion underfoot because it will give when compressed. Cork bounces back, so recovery from marks caused by furniture will leave minimal residual indentation, less noticeable than on wood, carpet, or vinyl floors. This same resilient quality is responsible for providing a warm and quiet surface for any room.

Fire Resistant - Cork is a fire inhibitor and will not spread flame. Cork also does not release toxic gasses on combustion.

A Thermal and Acoustic Insulator - Made up of over 100 million prism shaped cells per cubic inch, each one filled with air, cork inhibits the conduction of temperature and sound. Cork floors reduce impact noise, a great asset for applications such as multi-level housing, office spaces, museums and places of worship. Walking barefoot in your bedroom or bathroom in the middle of a cold night is a warm, quiet, and comfortable experience.

The grain less patterning of cork makes it ideal where space is a challenge. Cork tiles installed in two contrasting colours or tones, checker-board style, create a dramatic effect in an entrance way or kitchen.Cork is an environmentally friendly and sustainable resource. It is harvested from the bark of the Cork Oak, grown primarily in Portugal. Bark is harvested every nine years from mature trees, and they can thrive for up to 200 years.

Of course not everyone agrees with everything that is said about cork as a flooring material. On another Web site that reviewed and tested a number of the newer flooring materials, they warned that some of the cork products that they tested were prone to scratches and also stained if spilled liquids were not immediately wiped up. That same site warned against some of the newer exotic wood flooring materials, such as Brazilain cherry wood, which they state wears very fast, and some of the newer engineered or laminate floors, which were subject to both wear and UV ray damage. So, like other consumer products, you need to research the quality of the cork flooring products that you are considering.

I suppose that any flooring that you could choose would have its detractors. There are no indestructible floors that are low cost, never wear, resist stains and UV rays and are reasonable to install. If there were, we'd all have them. In the mean time, I am noticing that more and more wine bottles have the new plastic stoppers in them instead of cork. Maybe they'll go the way of laminate flooring and put a picture of cork on the outside of those, just to keep us traditionalists happy.

We're living in interesting times...

The ancient Chinese saying – “May you live in interesting times” – sounds innocuous, but it is actually a curse, since interesting times are meant to indicate troubled times. We certainly have been and continue to live in interesting real estate times in Michigan. Just yesterday I heard that the premier local foreclosure law firm in this area is hiring and looking to almost double their staff. This ostensibly is to handle the expected case load of the upcoming tsunami of foreclosures that will be kicked of later this year by ARM resets.

Make no mistake about it; we are not yet to the bottom of the curve that we are currently on, with declining home values and the resulting home losses. The ARM resets just add to the problems of a declining state economy, job losses and companies and jobs exiting the state. We have occasional news of new companies entering the state and new jobs being created, but the net is still negative and will be for some time. We will come out on the other side and reach a new steady state; perhaps, even with home values starting to increase again. We just don’t know how long that’s gong to take. Some economists are now saying that 2009 looks to be about the tie that we should see a turn-around.

So, am I having some sort of a bi-polar meltdown here? One day I say that I see a light at the end of the tunnel (actually just three days ago – September 25 post) and now predicting no turn-around until 2009. Not really. The light that I spoke of was an increase in home selling activity – more buyers out recently and more deals being done. That’s true. But if you look at the sales themselves one will see that the sales are mostly on distressed homes – foreclosures, corporate relos and desperate homeowners dumping homes at a loss just to get out.

Even the “normal sales”, if there are any that would have been called normal a few years back, are being made at prices or with seller concessions that are heavily influenced by the distressed market. I track these things weekly and most homes are selling fore between 90-95% of asking prices, with a significant number each week below 90%. In “the good ole days” the prices would have been between 95-97% of asking price. Houses are selling in our area for about 1.75 times the SEV (State Equalized Value – a Michigan term created by a tax law that supposedly equates to 1/2 of the assessed value of he home and helps regulate how fast our property taxes can rise) these days; whereas, just two years ago the average would have been about 2.25 times SEV (see my post of August 26th for more on SEV).

So we are still in a depressed housing values market, still in a buyers market and still in a slow market; but, hey, things are picking up. Maybe it’s pent up demand, as I saw in one article recently or maybe its just the feeding frenzy of people smelling a bargain (see my post of August 28th). Whatever it is, people are out buying again and that’s a good thing – at least for me. Most of the requests I get now are for bank repo houses, so maybe we’ll sell off that inventory fairly fast and get that pricing pressure out of the system. I certainly hope so for the sake of my sellers.

Real Estate Trends

A recent report in an on-line real estate news service that I get reported on a real estate market forecast of the make-up of the market over the next 20 years. The predictions, based upon well-documented trends in the general population, are not filled with earthshaking news, but they do demand that Realtors make changes in their practices. Highlights included:

• By 2010 over 40 percent of all households will be comprised of an age group over 55 years. • The number of citizens over the age of 65 years will jump from 34.7 million in 2000 to nearly 70 million by 2030 (a mere 30 years).

• The Spanish speaking population will increase from 31.4 million in 2000 to nearly 65.6 million in 2030.

• 50 percent of children under the age of 18 (42,853,649) will be a minority in 2030. Total US population is estimated at 400 million in 2030.

• The traditional household (married couple with children) which comprised 90 percent of the households in 1950 will comprise only 65 percent of the households in 2030.

• 29 percent of the US households will be living alone in 2030.

• From 2000 to 2030, the U.S. population will grow by 82 million, 72 million of this growth will occur in the South and the West.

• Worldwide the percentage of the population living in cities is projected to grow from 47 percent to 60 percent by 2030. (UN study 2003)

The report had some of its own conclusions about the growth of big cities and the likely population shift away from the Northeast and Midwest towards the south and west. No real news there. I look at this data and see a few things that will impact the real estate market where I am. I’m already seeing the leading edge of the baby-boomer retirement tsunami that is about to occur. The good news is that everyone is not leaving Michigan to go to Florida or some other warm state. Some retirees actually like having four seasons and Michigan has one of the highest counts of gold courses of any state, which is another draw. Perhaps the biggest thing that I consistently hear though is that retirees what to remain close to family, so they stay in the states where their kids have settled.

One trend that is working well for me is that many of these retirees have a desire to get into a small town setting, where they can walk downtown and have a friendly, welcoming environment around them (see my post of August 2 on measuring the “walkability” of your area). These buyers may also be looking for a location to age in place (see my post of August 24 on that topic), which presents some unique design challenges for me to meet.

I’m also hitting quite a few cases of divorce forcing housing changes. This is always sad, but the reality is that few couples who divorce can afford to stay in place, so new, almost always smaller homes are required. I probably have 15-20 buyer prospects right now all looking for new, smaller homes due to a divorce. I’m also getting a few single, first-time buyers who have finally decided that home ownership makes more sense than renting. There are some great buys right now for those buyers.

We are just beginning to see the increase in the Spanish-speaking population out in my area. Bank machines in town now ask me if I want to proceed in English or Spanish. I’m thinking that I may need to get my Web sites translated into Spanish to better serve this new audience. I may even have to go back to school an learn a new language (we had Latin when I was in school and I have yet to hit a Latin-speaking homebuyer).

I am already showing more homes to buyers in the close-in suburbs around Detroit – Ferndale, Royal Oak, Madison Heights and such; and, I expect that trend to accelerate. There is a large stock of affordable housing in those areas and in the city of Detroit that are becoming more attractive to younger buyers. The city’s programs of revitalization and redevelopment of the downtown area should also pay off with increased interest in the urban areas. A better regional transportation system would help, but that seems out of reach for our current set of governing regional politicians.

So the data in this report seems to already be impacting the real estate market in our area and good Realtors in the area are already shifting their practices to deal with the new and coming realities. We led the nation into the housing decline mess and I hope that we lead it back out too. As I reported 2 days ago, I see some light at the end of the tunnel – perhaps that’s a sixty-something, single, Spanish-speaking buyer, with no children who wants a place in the city. ¡Hola!

How do we compare?

There is a new way to invest in real estate that depends upon an interesting new real estate index for its pricing. The so-called RPX Index is offered by brokers (see http://www.radarlogic.com/ for details on it and the company that markets the index). The company - Radar Logic, Inc. - tracks the cost per square foot for home sales in 25 major metropolitan areas and then, using secret formulas, it produces a composite index, which it calls the MSA Composite (the MSA standing for Metropolitan Statistical Area).

Brokers across the U.S. are currently being solicited to sell shares in this index, which will float up and down with the composite of the real estate markets in those areas. It’s sort of like the Index Funds on Wall Street, except it doesn’t appear that this index is tied in any way to actually investing in the underlying real estate – it’s just a number that floats up and down and upon which you can bet by investing in this pool. There are many strange “investments” that hedge funds and others in the exotic world of high finance have created and this is just one of them. You’ve got to love the creativity of these people.

Anyway, I found it fascinating and decided to relay to you some of the information from a recent posting on their site concerning real estate pricing in some of the areas that they track. The data is for sold properties from July public records data that they collect, so it is a bit old, but the relative cost comparisons of the MSA’s that they track is still valid. I sort of had a gut feel for some of the differences that are shown I the data, but I had no idea that some of the gaps between areas were so wide. Below are some examples (note that I have rounded these off to shorten the entries) – All numbers are $/Sq Ft

DETROIT - $107……..Atlanta - $104……….Boston - $245

Chicago - $189…………Charlotte - $101…….Cleveland - $96

Columbus, OH - $101….Denver - $152 ……Jacksonville - $126

Los Angeles - $393…….Las Vegas - $173..…Miami - $195

Minneapolis - $159…….Milwaukee - $123…New York - $305

Philadelphia - $158..…..Phoenix - $159……Sacramento - $212

Seattle - $235…….San Francisco - $450.....San Diego - $312

San Jose - $468…….….St. Louis - $96……...Tampa - $137

Washington, DC - $236

Admittedly these numbers may not include all of the outlying suburbs, since they didn’t really define how wide of an area they include in an MSA. Our local numbers for the same period are as follows:

MILFORD - $137….Highland - $126….Commerce - $136

White Lake - $113..W. Bloomfield - $129..Brighton - $124

Waterford - $108….Lyon/S. Lyon - $136...Wixom - $120

So, Milford fits in above the Ohio crowd (but, then we all knew that, didn't we) and about even with Jacksonville and Tampa, Florida (don’t you wish we had their winter-time weather). Statistics like these are fun to look at, but, they’re basically meaningless. If you want a daily fix on these numbers, go to the Radar Logic site every day. If you want to keep track of what's hapening in the local, Milford-area market, go to my Web site - http://www.themilfordteam.com/ - and click on the Real Estate Statistics choice in the left hand menu bar.

Is that light at the end of the tunnel?

There’s no doubt that we’ve been in a long, dark tunnel in real estate in Michigan for the past year or two. That fact has been well documented in the papers and on the newscasts and even here in earlier posts. What is not yet being widely reported is that there are glimmers emerging from the darkness lately that may well presage the light at the end of this tunnel. I started seeing them and reporting on them back on August 13 (see my post about Looking for Rainbows). Just from a personal perspective I’ve picked up more buyers lately – more people who are out doing serious shopping for houses. I’ve also seen an up-tick in the flyer traffic at my listings – people taking flyers from the boxes at the houses. Even the showings have increased a bit and more of the current lookers are actually making an offer on something.

Now, I’ve seen an article or two in the newspapers or the weekly news magazines, written by economists or industry gurus that are starting to say positive things and note changes in the trends that portend a turnaround. I, for one, have certainly had my fill of the darkness and would welcome a more normal, more balanced market. I’m still showing a lot of foreclosed houses to people, but at least there are buyers out there going after these great deals. If they can’t find a foreclosure, many find a normal home for sale at a great price and go ahead with their plans with those houses.

We still have a rough patch to get through, with the current ARM resets about to cause another round of foreclosures; however, we may be getting more like Wall Street, were they regularly report things like, “the Street had already factored the end of the world into the market, so the was no panic at the release of that news today.” Maybe the real estate market has already factored in the next wave of foreclosures, so that will not cause more than a minor blip. I certainly hope so.

I don’t expect to emerge from this tunnel into a world that looks like the world was when we entered on the other side. As I said in my post “Nostradamus I’m Not” of September 17th, the new normal for Michigan is not anything like the old normal when we entered this tunnel. That’s not necessarily bad, just different. It’s something that will take some getting used to and which will require a whole lot of adjusting of expectations. I’m busy trying to adjust my business to this new reality – showing lots of smaller, less expensive homes, focusing on foreclosures, and trying to help sellers do the necessary things to market their homes in this new reality.

Unsustainable behaviours...

I live right near a grade school and a middle school, so I get to see several parades each day. These are parades of cars and trucks, each carrying a single student to or from school. Interspersed in the parade are the mostly empty buses that you and I help pay for with our taxes. I’ve been struck for some time with the fact that this is just one of the unsustainable behaviors in which our society currently engages. The fact that about half of these vehicles are not cars; but, rather, are large gas-guzzling SUV’s and trucks just adds to the unsustainable nature of the parades. Of course, when the little princess/prince gets driven to school they must also be picked up, so the parades continue off and on for most of the day.

The whole McMansion phenomenon in real estate is another behavior that has been doomed for some time. We just don’t have the economy, nor the higher-paid worker base, to continue to justify building more of those homes. The new, “green homes” movement is a positive effort in the real estate space to address the energy and global warming issues. The recent sub-prime mortgage meltdown was the predictable end to the unsustainable behavior of excess in the home buying market.

Another behavior that I think is unsustainable is the continued outsourcing of our manufacturing jobs to China or Mexico or wherever. I have thought a lot about this and I cannot understand how we can continue as a rich and powerful country of we don’t create any value. In my mind, value is “created” when you grow something or dig up something or manufacture something. You create value by farming or mining or manufacturing something. You don’t create value by serving each other hamburgers or doing each other’s taxes or providing each other with healthcare or cutting each other’s lawns or running the cash register at the Piggly Wiggly. To me, those service jobs seem to be places where value (money) is consumed (spent), not made. I’m not implying that they aren’t important jobs that have value in their own right, just that they don’t really “create” new value in the overall economic system – they move the value around and through our society. Much more than half of our society works at “serving” others and only a few actually still work at jobs that create value.

I have a fuzzy, general understanding of the concept of a “global economy” and in theory it sounds like something that should work; however, I think it is based too much in theory and not enough in on-the-ground reality. In theory, we are shipping the lower skilled, manual labor-oriented jobs to countries where the labor rates are lower and that should benefit us with lower costs for the finished goods that we buy. The same holds to some extent for farming and mining. The theory holds that the people displaced from those value creating jobs here will all, somehow, move up the value chain into service industry jobs or thought-oriented jobs (engineering for example). The theory breaks down when you understand that the 50-year old guy; who for the last 20 years made $30/hour, plus benefits, or better working on the automotive assembly line, didn’t get retrained to be an engineer or an accountant, and is now working at Home Depot for $8/Hour and has no benefits. That’s the reality that the theories don’t deal with very well. As a Realtor, I get involved when that same displaced worker is in foreclosure on the house that he used to be able to afford with his manufacturing job, but, now can’t.

So, I watch the daily parades of cars and buses and hear about another factory closing somewhere in Michigan and I wonder how long we can keep this up. Just in my lifetime, I recall the collapse of the American textile/clothing and steel and shoemaking and small and home appliance and toy and TV and computer other manufacturing industries (feel free to add to the list from your recollections). Maybe the Chinese/Japanese/Mexican/wherever manufacturing workers will someday send their kids over here for an education and we can all get jobs driving them to school each day and serving them hamburgers for lunch and cutting their grass and carrying their bedpans. When that parade starts I’ll be the old guy on the corner with a spray bottle and a rag washing windows and adding value and wondering where all that money went that I paid into Social Security.

Lawsuits, recalls and the homeowner/homebuyer

Over several recent home inspections I’ve had reason to be educated about a number of class action lawsuits and recalls of building products and home appliances and home mechanical components. This can be a vexing issue for homeowners and a worrisome one for home buyers. The problem is made worse for everybody because there doesn’t appear to be any single place where the homeowner or home buyer can go to get to review a list of house and household products that have been recalled.

The issues span everything from the siding on a home to the furnace and beyond. In the 1990’s there was a big class action law suit against Louisiana-Pacific, a major building products supplier. It seems that a whole bunch of their siding products were defective and tended to be subject to warping and rot if not carefully and continually kept sealed and painted. Lots of lawyers made lots of money off that and some home buyers got money to deal with the issue when an official recall was issued. Of course, not every homeowner with L-P siding even got a notice and not everyone who got a notice decided to go for the settlement refund. And to make things worse, not everyone who collected from the settlement funds went on to actually replace the defective siding. So, there are still lots of homes today that have the L-P siding. Some home inspectors know about the lawsuit and settlement and know what to look for, but some don’t; so, it is still possible today to buy a home with L-P siding and get it inspected before closing and yet end up blissfully ignorant about the fact that you have a home with siding that is likely to rot. If the home inspector when you go to sell it is better than the inspector when you bought it, look out! It could end up costing you thousands to replace the bad siding.

The same thing happened a few years back with roofing. The Certain Teed company made some shingles that looked pretty good and were supposedly guaranteed for 20 years, but they started to crack and deteriorate in 5 years, sometimes less. There are still lawyers soliciting clients to participate in that class action lawsuit and lots of houses here in Michigan with those shingles on the roofs. More recently a whole bunch of brand name furnace manufacturers apparently fell victim to a defective secondary heat exchanger part in their high-efficiency, condensing furnaces (they all used the same inferior part) and now there are class-action lawsuits against most of these furnace makers and a recall is underway or proposed as part of a settlement. In my own home, I received notice of a recall of the Maytag brand dishwasher that I bought a few years back. I had returned the product registration card, so I was on file with the manufacturer. It turned out that the model and serial number of my unit was not on the recall list for that brand, but those that were on the list had a major fire hazard and needed to have a component replaced.

I did a bunch of on-line searches trying to find one spot where homeowners and home buyers could maybe go to see what lawsuits and settlements are out there about products like these that might be used in the construction of homes or as mechanical components in the home – I could find no such place. There is a site www.recalls.org that seems to do a pretty good job on recalls for housewhold items, like appliances; so, you might want to check there. Other than that, as a home buyer, you are at the mercy of the home inspector to be knowledgeable enough to find these defects and point them out. As a home seller, you should have a good inspection done at the front-end of the process (see my post of September 12th – Ignorance is not bliss) to make sure that you know about these things ahead. It’s not a pleasant thing to discover that you may be on the hook for thousands of dollars worth of repairs if you want to save the sale of your home. Maybe I’ll do the research and put a page on my Milford Team Web site of all of the recalls that I can find taht might affect homes. Stay tuned.

Doing the Sgt. Schultz routine...

I’m dealing with a lot of foreclosures lately, so I get to experience several variations of the Sgt. Schultz routine. Every bank or mortgage loan company that has a foreclosed home in their REO inventory (that stand for Real Estate Owned, an acronym in our industry and not Real Estate One; although we do have an REO arm to our company too and manage quite a few bank-owned properties) has a bank documents package that they send out in response to any offers on the property. These bank packets, as they are called, range from 20 pages to 40-50 pages and all say the same thing, just like Sgt Schultz – “We know nothing.”

They go on to say in excruciating detail that not only does the bank know nothing, but it is also responsible for nothing. Somehow that doesn’t come as a surprise. I’m sure that they paid teams of lawyers for weeks of work to craft these packets. Page after page contains disclaimers for every conceivable thing that could possibly be wrong with the property and absolves the bank from any liabilities should the home buyer later find the problems. About the only thing that I haven’t seen in these documents is some disclaimer about Osama bin Laden hiding in the basement or crawl space; although they do cover rats and other vermin, so maybe he’s covered in those clauses somewhere.

This practice in real estate is just our industry’s little piece of the burden that we all bear for the excesses of litigation in our society. We have messages on lawn mowers telling us not to stick our hands under the mower while it is running. Well, DUH! We have warnings at the McDonald’s telling us that the coffee is hot and may burn you if you pour it all over yourself. OK. I haven’t seen a warning on a hammer yet telling the user not to hit him/herself in the head with it, but that’s probably coming. Most of these things start with the assumption that the user/owner of the thing is basically stupid and would do these things, if not warned. They are all a consequence of some lawyer somewhere convincing a jury that the product maker was liable for the injury caused to the user because they did not tell them not to do the stupid thing that caused the injury.

So, now we have banks using 30-40 pages of high-priced legal words to tell us that they are not responsible for the mold in the attic or the fact that the plumbing has been stripped or that the furnace doesn’t work in the abandoned repo house that you may be about to buy. There is an underlying assumption here that the buyer is so euphoric over the fact that they’re getting this $200,000 house for $50,000 that they will throw caution and common sense to the wind and not do an inspection to protect them from these surprises. I suppose that some buyers might do just that; and so, the banks need to protect themselves from the buyer’s lawyers, who will be trying hard later to prove to a jury that the poor innocent home buyer stuck his hand under this incarnation of the running lawnmower because there was no warning sign from the bank telling him not to do that. Lawyers – ya got to love their chutzpa!

If you're interested in a foreclosed home, go to my Web site -
http://www.themilfordteam.com and look for the little foreclosure sign on the Home Search page. That will take you to a site that Real Estate One runs called
www.ourforclosurehomes.com. If you see some that you think yoou'd like, give me a call and we'll go see some together. I visited one this morning that should have it's interior pictures in the dictionary next to the word "nasty". They're not all that way, but this one looked like it might have been used as a crack house at one time. It was definitely a dumpster queen.

It's a wonder that we survived...

The more that I see of our modern paranoia with the things around us, the more that I wonder at the fact that I survived this long. And most of my peers did, too. Somehow we lived through the lead-based paint era. We played with mercury and rubbed it on coins and lived to tell about it. We lived in houses insulated with asbestos laced insulation and came out on the other side. We even survived the installation of new carpeting and marveled ignorantly at its new carpet smell. Our water lines and plumbing were a mix of lead pipes and later PCV and yet we still have our senses. And whenever mom found some mold she sprayed some Clorox on it and wiped it away without having an asthma attack. We even sprayed ourselves with DDT-based bug repellent to keep the mosquitoes away.

Maybe we came from hardier stock back then. I have no idea how the human stock got so diluted, but apparently it did somewhere along the way. These days millions have allergic reactions to the slightest hint of any of the things that we grew up with. I’ve actually witnessed a potential home-buyer having an asthma attack in reaction to being told that there was mold in the house that she was in. It was a bit strange that she had been in the house for 3 hours without a symptom prior to being told about the mold. Perhaps it was very sneaky mold that had been waiting for just the right moment to strike her down. I’ve also witnessed people who can only be in a house where a cat lives for a few moments before they begin to wheeze and their eyes to swell shut – actually my wife has that sort of reaction, too. And, I was with a lady who walked into a house with fresh carpeting and immediately had an allergy attack. I know that these reactions are real, because I've seen them take place.

I lived through exposure to a lot of those things without developing hideous rashes or requiring an oxygen mask just to breath. I still enjoy that new car smell (vinyl venting off in the car – although my wife tells me that it actually made her sick when she was a child, so maybe it’s always been an issue for some people) or of a new carpet (the glues used in the carpet venting gases). I probably wouldn’t rub mercury on a dime again, but I wouldn’t evacuate a whole school building, as recently happened in our area, just because someone dropped and broke a mercury thermometer in the hallway. And, I don’t check under the sink at someone’s house to see if their plumbing is copper or PCV before I drink the water. I’ve made it this far without being that paranoid and I think I’ll be OK for the future.

These things all made me wonder what has changed? Have we as a people changed or have the products that are all around us become all that more toxic or allergenic? I have concluded that some of both have likely happened. Maybe we as a species are becoming more sensitive to toxins, allergens and other irritants around us and maybe the wonders of science and chemistry have introduced new, more powerful irritants into our world. There is also the factor that our understanding of the world around us and the things that are bad for us has dramatically improved over time. We just didn’t know about the dangers lead and mercury in paint when I was young. Mercury was used to prevent mold in the paint back then and lead was a primary base for paints. Asbestos was considered to be a great insulator, so we made brake pads of it and wrapped our steam pipes in it. We even insulated our houses with it and made siding from it. Now we know better.

Medical science has made great strides, too. I remember that many aches and pains of my youth were written off by mom as “growing pains.” Some of those were likely warning signs of other things that eventually got better on their own - or didn't. So, now we know better; but, that doesn’t mean that we should hide in our shells from everything. They’ll likely tell us next year that shells have some toxins in them anyway and that hiding in them is bad for us, too. Certainly we need to be informed about the dangers that surround us in everyday life; but, life goes on and we can’t hide from everything - we’ll live through it. Medical knowledge has improved and new cures, at least for the symptoms, have been created. Our society has taken steps to ban or tightly control most of the really bad stuff that I grew up with; so, we're not quite as much at risk. It’s a wonder any of my generation survived, but we did and yours will, too.

Seeing who's behind the curtain...

The current round of ARM resets and the round of defaults and foreclosures; accompanied by much gnashing of teeth and wailing “what happened?” in Washington, is finally exposing the wizards who’ve been behind the curtains in the sub-prime mortgage market. Those zero down loans and no-doc loans had always seemed to be too good to be true and guess what – they were. The free lunches being handed out turned out to be filled with spoiled milk and sour grapes and now the stomach aches begin for the homeowners who fell for those lines.

And speaking of bellyaching, it’s a bit hard to stomach the outcries for a bailout from the greedy sub-prime loan market companies. They have been chumming the water and in a feeding frenzy for years, taking advantage of unsophisticated borrowers and the risk-taking home-flippers alike. Now, they are begging for relief from the very risks that they created. It is somewhat delightful to watch the even bigger sharks – the hedge funds that swoop in and buy up distressed assets and companies for pennies on the dollar – now feeding on these sub-prime lending companies.

Of course the little guys in all of this - the homeowners – are left to fend for themselves again. I’m reminded of Norm’s comment to Cliff on one of the Cheers TV episodes – “It’s a dog eat dog world out there; and, I feel like I’m wearing Milk Bone underwear.”
Now there are some who would say that these folks brought it upon themselves by also being greedy – for reaching for more house than they could really afford. Perhaps that’s true in many cases. I’ve actually seen quotes in local newspaper stories from distressed homeowners who are in foreclosure where they state just that. That’s a pretty mature thing to admit; but, it’s likely the first step to dealing with it and getting on with life. You’ve got to learn from mistakes, not let them just depress you (see my post in mid-August on Learning from Mistakes). In some cases folks who did have the wherewithal to buy that bigger house got laid off afterwards, so the “reached for too much” argument doesn’t apply to them. They just got unlucky, through no fault of their own. Our state economy has been like quicksand for a few years now.

So, back to our theme of the day. What was behind this sub-prime lending curtain turned out to as big a disappointment as in the Wizard of Oz. Instead of some nice, bumbling old man in a wizards outfit, we had a bunch of sleazy operators out to make a quick buck – not all, mind you, but a bunch all the same. I found it interesting that some of the same CEO’s that were involved with the S&L loan scandals of the 80’s (sometimes called the largest theft in the history of the world) were also running some these sub-prime loan companies this time around. Apparently, they all served what little time they were given or paid whatever the fines were for their S&L fiasco; and, then, turned around and got right back in the home loan business, many in the sub-prime space. There ought to be a national registry for loan scammers like there are state registries for sex offenders, so that we could keep these guys away from our money. Once a thief, always a thief, I guess.

Real Estate Bullies and Blowhards

It’s an unfortunate reality in most sales jobs that there are people who believe that pushing hard until you get the contract signed or get thrown out is the way to conduct business. They are bullies and blowhards and many homeowners don’t know how to deal with them and get bowled over. The homeowner who allows him/herself to be bullied into signing with these blowhards is usually in for quite an unpleasant experience. They use the same pushy, in-your-face tactics to badger the homeowner into constantly lowering the asking price. A good deal of the time they don’t end up selling the house after all and the homeowner may get discouraged by the whole process and go away believing that all Realtors do business that way.

Nothing could be further from the truth. Most of the good Realtors that I know are caring professionals who are especially sensitive right now to the pain that is involved with selling into this down market. They try hard not to come across as pushy; but, rather try to present themselves as knowledgeable, professional real estate advisers who can help the seller formulate the best plan for marketing his/her home. That includes giving advice on what items may need attention prior to getting the home on the market, providing market pricing advice and laying out a marketing plan to maximize the home’s exposure to the marketplace.

When you invite Realtors into your home for interviews, you should not be afraid to tell them if you expect to interview several candidates and then make your choice. Watch out, if you get a Realtor who starts off with a line that sounds like this – “One of three things is going to happen today, either you’re going to decide to hire me at the end of this interview, or your going to decide that you don’t want to hire me, or both you and I will have wasted our time”. Just stop them and tell them, “No that’s not right. What’s going to happen is that you’re going to tell me about yourself and your company and how you would market my home. I’m going to listen to you and 2-3 other Realtors and then make a decision. If that’s not what you came here for today; then, you can save us both a lot of time by leaving right now.”

Bullies hate it when people stand up to them, so they will likely be a bit flustered and many of them may just choose to leave right then. That’s not a loss; in fact, it may be a big win for you. Choosing a Realtor to help with the sale of your biggest asset is too important for you to allow yourself to be bullied into a quick, on-the-spot decision. If that blowhard agent doesn’t have time for two visits with you now, how much of his/her time do you think you’ll get after they get the listing contract that they came for – you may not see them again until it’s time to change the price or re-list.

So call me today. On my first visit I’ll be focusing upon getting to know you and the property and understanding why you are selling and what some of your preferences are for things like open houses and showings. I'll ask to schedule a second visit in which I present my recommendations for getting the property ready to market and about market pricing. I'll also present a marketing plan at that meeting that will show you, in whatever level of detail that you wish to get, how I will market your home.

Not just any port in a storm...

And now for a word from our sponsor - me. After yesterday's somewhat brutal assessment of he current real estate market and its immediate future, I couldn't help myself and came up with today's commercial. It's just not a time to be in the market without a good Realtor partner and a part of what makes a good partner is the company that they represent.

We are in a major real estate storm, especially in Michigan; and the seas for home sellers are very rough. There’s an old saw about “any port in a storm”; however, I would submit that now is the time, more than ever, to seek a safe harbor in which to ride out this storm. If circumstances dictate that you must sell in these conditions, then seeking out the best and the safest company to go with makes the most sense. This is no time to be throwing in with some fly-by-night company (see my posting of June 18th on Two Clowns and a Sign) or even the smaller franchise operations, which may not have the wherewithal to maintain their marketing and advertising programs during this downturn. Real Estate One is Michigan's largest and most successful real estate company.

Now, having size doesn’t always mean better; but, it almost always means more – more agents who might show your listing, more advertising to give your home more exposure and more Internet presence to attract more buyers. In the real estate game, more in those categories is a good thing. Size also normally means more staying power. We’ve seen quite a few small branch office of multi-office franchisers close in the last year and we’re seeing quite a bit of movement of agent in the marketplace (fortunately for us many are coming to work for us). There’s peace of mind in knowing that the company and agent that you’re signing up with will still be in business a few months from now. Size for us also means having affiliated companies - John Adams in the mortgage field, InsuranceOne in insurance and Capital title in the title field- so that we can create and offer more and better packages of services and marketing programs for our customers.

In addition to size, experience is important in these trying times. It’s just good to know that you’re dealing with a company that’s been in business since 1929. We’re still owned and run by the founding family and there are quite a few people in the company that have been around for 30-40 years; so, we’ve got people who’ve been through a few of these storms. Our management doesn’t panic in a storm like this, because they’re weathered them before. They adjust, they adapt, they change and they survive, precisely because they’ve been through them before and they help our agents and clients do the same. Call me and let’s talk about how we can help you get through this storm safely. End of commercial. We will now re-join our regularly scheduled blog in progress.

Nostradamus, I'm not, but...

Looking into the crystal ball of real estate. I get asked a lot by clients and friends and acquaintances, “When will we get back to normal in real estate?” The answer may well be that this is the new normal. Not necessarily the high foreclosure rate that we currently are experiencing; although that likely will last through much of next year. But the declining home values and lack of buyers may well last for a few years, as will the housing overstock situation, at least in Michigan.

We live in a shrinking state with a declining economy and it will take years to reach a new steady state. That new “normal” is likely to be unlike anything that most of us have experienced in the past. One has only to look at other states and areas that have gone through the same things as their primary industries collapsed or shrunk – places like Pittsburg and Cleveland and states like Pennsylvania, Ohio and West Virginia, as the steel and mining industries went into decline.

Michiganders, and Detroit area Michiganders in particular, like to refer to the Big-3 automakers as the engines that drive our economy. People on the west side of the state (which it might be noted is doing a bit better) would likely hasten to remind us that Michigan is also one of the office furniture capitals of the world. Anyway, what we really have on this side is the Big-1 and two struggling auto companies whose very survival is still in question (I noticed recently that even the press is starting to call our local automotive companies the Detroit-3 instead of the Big-3). Anyway, these “engines” support a huge base of suppliers and others whose very dependence is based upon the wealth being generated in the plants and engineering facilities and headquarters operations that are in the area. Much of that is shrinking rapidly and the wealth of the “middle class” UAW workers and the thousands of middle level engineering and headquarters workers is shrinking fast with it. Plants are closing, a considerable amount of engineering and headquarters functions are being outsourced (many to overseas locations) and lots and lots of the suppliers and other auto industry hangers-on are going under. How can that not impact the real estate market for years to come? Answer – of course, it will.

So, are we staring into the abyss? Is it time to build another ark? Are we all doomed? No, of course not, but things will never be the same as they were 2-3 years ago; so, we need to adapt to the new reality. Builders have already started to recognize that there will be few buyers for the McMansions that they have been churning out. They will need to find ways to build smaller, more affordable housing. The Baby Boomers may have one last hurrah round of home-buying left in them, but it’s more likely to be their downsizing round as they head into retirement. And, the up and coming Tweeners, Gen-Xers and Gen-Yers are unlikely to jump in and buy up all of that glut of McMansions that the Baby Boomer will leave behind on the market; unless, they can find one in foreclosure at about half price.

But, people still need to live somewhere; so, houses will continue to sell. I’m still showing houses to people; it’s just that fewer and fewer “buyers” are looking at houses at the higher end and more and more are focused right now on the foreclosures and other bargains in the market. I picked up my HUD keys the other day, so that I can start showing the low-cost HUD homes in the area. That may become the new sweet spot in my new “normal.” Maybe this is a blessing in disguise for some of the older communities in and around Detroit. Royal Oak had it’s time in the sun and then got overpriced. Maybe now Ferndale and Madison Heights and other close-in suburbs of Detroit will attract people back towards the downtown area with their stock of affordable housing. That is where the less expensive homes are and maybe that’s where the Gen-whatever’s will end up. I’m still trying to make that out in my crystal ball.

Staying in character...

We recently had a training session in our office where we were tested on our knowledge of the slang and Text Messaging terms/phrases of what could be called Generation Y – the current younger generation of potential home buyers. I did OK on the slang – I got 22 out of 25 correct. I wasn’t nearly as good on the Text Messaging stuff, since I don’t TXT. There were multiple points to the exercise, I’m sure; not the least of which was to at least try to understand what’s going on around us with the younger people that we see as clients.

I don’t see myself becoming an TXTer. I use email all the time and couldn’t get by without it. I remember the days when FAXing was the only way to quickly get stuff (contracts or other documents) to someone. Now it’s just as easy and more convenient to scan them in and email them. Perhaps if I were a younger parent I would learn to TXT, because that seems to be a good way to keep track (or at least try to) of children. The “WRU” message (where are you) is apparently a favorite in the TXT world. Of course kids are likely to respond “MYOB” – mind your on business – or “NOYB” – none of your business – ;although maybe not to mom or dad.

Our real estate business is struggling with what direction to go to keep up with the modern, mobile world. Our local multi-list service is experimenting with mobile access to the MLS from phones and devices like the Blackberry or Palm Treo. The theory is that an agent will be able to respond on the fly with information about a house by accessing the MLS data from his/her car on their phone/device. I’ve certainly made a number of sign calls while sitting in front of a house with customers and can see some value in being able to access information on the fly. I think I might feel better with a laptop and a Wi-Fi connection; but I can see where a handheld might be convenient, too, at leat for that.

I have several young clients right now; many looking to buy their first home. I suppose that they TXT with their friends and family, but none have asked me if I do and I haven’t received a single TXT message from them (yes my cell phone does support an TXT service). I’ve decided that the best route for me is to stay in character. I’m not some young, hip 20-something. I’m even on the before side of the Baby Boomer generation, so trying to be hip in a modern sense would likely look ridiculous. I could see myself doing email on a Blackberry, even though I don’t have one of those. At least I’d probably be reading and replying in whole words, not some abbreviation code. I’ll stick with what I have – several Web sites and my blog, my cell phone and email. That’s cool enough for me. Oops, I used an old fogey term there didn’t I? In the mean time, CU.

This old house, living in a historic home...

The Milford Home Tour is this weekend and it got me to thinking about how people lived back at the turn of the century - no, not in 1999, but in 1899 and earlier. I live in a house that was built in 1885, so I have some first hand experience with at least the base architecture. Of course, my house and most of the historic homes in Milford have been extensively updated over time, basically to accommodate living in them. I still have the remnants of the original cistern in the basement of my house, but I can’t imagine living off water that was collected from the run-off from the roof, as they did back then. I still have some knob and post electrical wiring in my house; although I think only one circuit actually still uses it. I still have one of the original rotary electrical switches in my home that gave rise to the term “turn on the lights” (you actually do turn it for both off and on and mine is still in operation).

The basic architecture of the larger historic homes was very practical for the time, but leaves one with somewhat confusing layouts these days. Most homes had two front doors, one leading right into a front parlor where the dead were most often laid out for viewing prior to burial. The other front doors often lead to a stairway to the second floor or to a hall or room that would allow the user to by-pass the “funeral parlor.” I also have two stairways in my old house – one in the front of the house and one in the rear that leads right into the kitchen. My rear stairway has been moved at least three times over the life of the house, as evidenced by the residual stairway races in evidence in various room ceilings in the house. That apparently wasn’t uncommon either. I’ve still got the original hardwood floors on most of the first floor, but the original broad board floors on the second floor were covered with linoleum sometime in the early 1900’s. I refinished the hardwood floors on the entry level myself after several companies refused the job – citing boards that were too thin for their commercial-grade sanders.

I had all original windows until recently. Even with storm windows on the exterior, it was costing an arm and a leg to heat in the winter and cool in the summer, so I bit the bullet and replaced all of the upper floor windows with modern thermal windows. I still have original, single pane, “wavy glass” windows on the first floor. The plumbing and electrical (with the exception of the one circuit noted above) have all been pretty well updated. I still heat with steam radiators, but the boiler is a newer model and so a bit more efficient.

One has to write off a whole bunch of odd or unusual things as “character” in these old houses, including uneven floors, small or missing closets and more, but smaller, rooms than one might find in a more modern house. We have a guest bedroom that drops about 3 inches as you walk from one side to the other. Our first guests told us that they felt like they were going to roll out of the bed, so we shimmed up the low side to level it. There are nooks and crannies everywhere, many of which have no apparent use –they’re just there. Of course, our grand kids love the place. There are more places to hide than they have at home and they love running up one staircase, across the upper floor and down the other staircase. Somehow it’s all very Normal Rockwell feeling and we wouldn’t trade it for all of the modern McMansions in the world.

I specialize in the historic homes of Milford and have been in all of the ones that are for sale there. I tell perspective historic home buyers that buying an old house is sort of like getting a home and hobby all in one. There’s always something to work on or upgrade or fix; but, you’ll never feel the way about a modern home as you can come to feel about one of these grand old homes of the last century. So give me a call if you’re looking to buy a historic home in Milford or anywhere around southeastern Michigan. I can help you look at it from the perspective of someone who’s living the dream and can help make sure that you don’t buy a nightmare instead.

Is staging right for you?

In the real estate business a whole sub-industry has grown up around the concept of “staging.” Staging involves making the home look better through the use of a professional who is schooled in interior design. These pros may use your stuff or they may bring in stuff from outside (it costs more with their stuff, since you are essentially renting it). They come in and de-clutter and clean first. Then, they rearrange stuff or bring in stuff to make rooms look better – more current, bigger or cozier or at least more stylish.

If the house that you’re trying to sell is empty, the stager will bring in furniture and accessories to make it look lived in; albeit, lived in by an extremely neat person. It is an old real estate axiom that empty houses are harder to sell, so maybe staging has a value there. In the normal house staging can bring out good features and may help soften bad ones. Proper staging can make a small living room seem more spacious or turn a big, cold basement room into a cozy family room setting.

Certainly a good stager can turn almost anyone’s home into a better looking product. That the rub in a recent article that I saw that claims staging is a form of false advertising. The author made the case that staging is used in some cases to hide issues or mask defects. I suppose a well placed area rug could hide a stain in the carpet or a discolored area of wood flooring and that would be a form of false advertising or dishonesty. I’m sure that being dishonest is not uppermost on the stager’s mind. They are more likely going for ooh’s and aah’s, rather than trying to hide the aha’s.

Staging isn’t cheap either, especially if the stager charges you for a bunch of accessories or furniture pieces. It can cost several hundred dollars to stage an empty house and a few hundred for one that is occupied. Most of that is for the “creative talent” of the stager, of course. Of course, your mother will tell you that there’s nothing that a stager could do that she couldn’t tell you anyway.

Perhaps that’s an alternative. Not necessarily mom; but, if you have family or friends who you consider to have good taste, ask them to give you their opinions on what you might do to make the place look more appealing. Just remember that, once you’ve empowered them to tell you what you need to change, you may hear things from these people that you really weren’t prepared to hear. They may not like your display of deer heads on the family room walls or the mismatched and worn furniture from your grandmother’s house in the living room. Just grin and bear it and take their advice. These are people who are looking at your house much in the same way as a potential buyer might and they are telling you the truth. Dealing with it now may cut down on buyer distractions and help sell your house faster.

Repo man...

Repo man…

Lately, almost everything that I’ve been showing to buyers are bank repo homes. Buyers have become accustomed to looking for foreclosures. Now, everybody wants to get a good deal, but that doesn’t have to mean looking only for foreclosures. Many regular home buyers have dropped their prices to compete with the foreclosure market, so not looking at them might mean that you’d be missing great buys there, too.

The repo homes range from stripped or vandalized, basket cases to really nice homes that are in good shape. Many are actually new-builds that bankrupt builders lost to the banks. They might need some light fixtures and plug covers and other finishing touches, but some of these are also in great shape and are very good deals. Lots of the repos that banks have owned for a while need considerable maintenance attention. It’s amazing how fast nature can try to take over a home. Some have been broken into and vandalized. In some areas copper thieves have broken in and stripped all of the copper plumbing out of the houses. In many the jetted bath tubs have been stolen. Most don’t have any appliances either,

Most repo houses have been winterized, which means no water and no power or gas. Some things, like water heaters don’t necessarily take well to being turned off and drained, so expect some leaks when the house is de-winterized. If you make an offer that is accepted, you should ALWAYS de-winterize the house for the home inspection; even if the repo company makes you pay for it. You should also get the power and gas turned on, too, which you may have to pay for, too. Not doing these things will severely hamper your home inspector and give you an incomplete report upon which to base going forward. A good home inspection will give you a list of things that need to be done and allow you to factor those costs into your decision to proceed. Remember that dissatisfaction with the home inspection results is one of the two major “outs” that you have on any deal (the other is inability to get a mortgage loan).

Lastly, make sure that you and your agent check with the Home Owners’ Association (HOA) and the local governmental entities – township, village or city – to see if any unrecorded liens or outstanding debts (like an unpaid water bill) exist that could come back as your responsibility later. The seller (even a bank) is usually responsible for those things, but if they aren't found by the title company you could be on the hook for them later. Banks sometimes refuse to pay for local government or HOA mandated grounds maintenance, i.e. lawn mowing or bush/tree trimming that a city/township or HOA orders done and sends them the bill. You likely would be on the hook for that, too.

If you bid on a foreclosed house, you will get a bank document package that may be 40-50 pages long. Read through the whole thing and have your attorney review it, too. Most of these bank packets are like a legal variation on an old Paul Simon song – they are 50 ways to say “We know nothing! We are responsible for nothing!” You’ll have to sign that document and likely initial every page, to indicate that you read it. By signing it you are relieving the bank of any responsibility for anything; and, guess who then picks up those responsibilities? So the old saw – look before you leap – is really applicable here. Bank-owned houses can be great deals, but they have their own unique set of potential issues. With foreclosures it is even more important to have a good Realtor on your team to run interference and make sure that you see and understand ALL of the risks involved and not just the rewards. Fortunately for you, you already know a good Realtor.

Ignorance is not bliss

Is ignorance really bliss?

I often advise clients to think about having a home inspection done as a part of getting their home ready for market. Most don’t want to pay for that (usually $250-400) and prefer to remain blissfully ignorant of any problems or issues that their home may have. That is a false savings and akin to putting your head in the sand when a treat arises.

The fact is that you don’t want to wait until you have that live buyer on the hook to find out that there is a mold problem in the basement or that your furnace has a cracked heat exchanger that is sending carbon monoxide into the house. What happens when you wait is that some inspector, who may or may not have good people skills with the buyer, will find the problem and then may scare the heck out of your buyer. I’ve seen buyers walk out at the inspection and immediately demand that the deal be terminated, just because a home inspector poorly handled some issue that was easilky remedied.

The other potential benefit of getting a home inspection ahead of the listing is that it can provide you with a list of things that the buyers may ask for and give you time to seek pricing information. If your roof needs replacing soon, a buyer may ask for an allowance. If you know about that as a potential issue ahead, you can get quotes and know what to offer for a concession. The same is true of things like replacing an older furnace or hot water heater. The more you know about things ahead,. The better you can be prepared to negotiate about them later. You can use the quotes that you get as supporting evidence for your concession offer.

There is an argument that some have put forth (sort of the real ignorance is bliss argument) that finding out bad things about your home will mean that you must disclose them. That is true; however, this is another case where you can then be prepared to discuss what you’re doing, or are willing to concede, to fix those problems. If you find mold or radon in your home in an inspection, you need to act on remediation of those problems. You can’t ignore them; but, at least you can get quotes and get the problems fixed at your pace, rather than I the midst of negotiating a sale.

So, bite the bullet and get an inspection done as part of your listing preparation. Take the inspection results and make a “to-do” list from it. Some things you just need to go ahead and get done. Other things you may choose to just get job quotes from 2-3 tradesmen to have for negotiating purposes. You can offer the buyers a copy of your inspection, but most will likely still want their own inspector to look again. Don’t be offended. Be confident that you’re not going to get surprised and that you’re ready to have an informed conversation about any concessions that may be requested, based upon inspection results.

They will look...

Trust me, they will look in your closets.

Many home sellers have a sort of “sweep it under the rug” mentality when it comes to getting ready for showings. Of course no one really hides things under the rug…they throw it in a closet. I guess they think that somehow things will be safely hidden if they are just tossed into a nearby closet. Of course they are wrong. The buyers will open that closet and they will see the junk that is just tossed in there and they’ll know what you did. They will not be impressed.

In the market that we find ourselves in today, every little things counts, because there are just too many homes available to have to “put up with” almost anything that the buyer doesn’t like, which all too often includes dirty or cluttered homes. Disheveled closets are just an indicator to home buyers that the person who lives there may not care enough to do other things right, too.

So, get your stuff together and get organized. If you need to buy a closet organizer to accomplish this task, do it. It is worth the money to give your place the neat and clean look that will ensue. There is even a new system called Rotabob that uses a tracked system similar to those found in dry cleaners to move your stuff around in the closet and make everything reachable. Go to www.rotarycloset.com for more on that.

The point is that people get turned off if they open a closet door and your junk attacks them. They don’t give you points if they can’t even walk into your walk-in closet because your shoes and junk are all over the floor. And, they really don’t care if you’ve cleaned all of your sports equipment junk out of the kid’s bedrooms, if it falls out on them when they open a basement door. Trust me, they will open the closet doors. They want to see storage space, not a mountain of your stuff.

If you have a bunch stuff lying around the house (off season sports equipment, out of season clothes, whatever), go rent a storage unit somewhere. The small amount that you spend for a few months of storage, in order to get your stuff out of the house, will pay off in a quicker sale. Just put the out of season stuff there and you’ll be surprised how mush bigger and cleaner your house will feel to the buyers and to you.

Using the "R"-word in real estate

This week’s Business Week magazine is one of the first times that I have seem where the “R”-word was used in conjunction with the housing market. Admittedly, I have been reporting a fairly gloomy landscape for some time, but even I did not call it a housing recession; although that is probably a fair word to use, especially in Michigan.

According to Wikipedia; a recession is traditionally defined in macroeconomics as a decline in a country's real Gross Domestic Product (GDP) for two or more successive quarters of a year (equivalently, two consecutive quarters of negative real economic growth). However this definition is not universally accepted. The National Bureau of Economic Research defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. The term recession is often used in conjunction with a specific sector of the economy, in this case the housing sector.

So, I guess that the definition and what we can see happening are a good match in the housing sector in Michigan. We are experiencing the deflationary effects of our recession now and it will likely get worse. We are just at the begging of the round of big ARM resets. The majority of the ARMs that will adjust this year will do so between now and the end of the year; and then, WHOA, Nelly, watch the foreclosure rates spike. We are currently only at the 3-5% level of foreclosures as a percentage of the total active real estate market. That figure could go as high as 8-10% by early next year, maybe higher. Now those are figures that virtually scream the “R”-word.

What can you do, if you have a ticking ARM about to reset on your home and you know that you can’t afford the reset? You could try to refinance the whole thing – the first and second mortgages. But, many homeowners are already upside-down – they owe more than the home is currently worth. Most of these owners also can’t afford to bring money to the table if they sell their homes. First, call your lender and trying to work out a refinance with them or explain that you do not want to go into foreclosure and see if they have the latitude to work with you. Most lenders really don’t want you to default and many will try to come up with a workout plan.

If your lender isn’t receptive to helping you work things out and you can’t get the place refinanced for enough to cover the current debt; then, call a Realtor and get his/her advice, now! Don’t just ignore things until you are in foreclosure and headed for the sheriff’s sale. Your Realtor will ask you to cooperate with him/her to get the authority to negotiate with the bank on your behalf and they will start a process called a “Short Sale” – a sale in which the sale price will be less than what is owed on the house. Your realtor can explain the process and the consequences and hopefully get the place sold without having the foreclosure process pro ceding all the way to eviction. This is a painful process to go through, but the alternative – going all the way through foreclosure – is even more painful. You dona’t have time to wallow in self-pity if this happens to you. It’s time to take action and move on with your life. Call today!

Back in business

OK, it's back and I'm happy. I got my computer back this morning and it seems to be working fine. I've spent the better part of the rest of the day re-installing applications and updating them. It's amazing how many apps I've got that I need on a fairly constant basis. It's also amazing how dependent I've become on this thing!So, anyway, I'm happy and I'm back to being able to do business at a full-strength level.

I had the additional frustration at the end of last week of having to re-schedule a closing for the second time because Tweedle Dee and Tweedle Dumb - the title company and the mortgage company in this deal - can't seem to figure out how to talk to each other. I spent the better part of three days trying to get through to the title company people, calling every 1/2 hour and leaving voicemail messages, with almost no results. The bank people reported the same issue. Of course the title company people reported to me that they couldn't get the bank people to answer their calls either. I have no idea why these people feel that they can just ignore voice mails and emails and stay in business. Maybe they won't; and, in this case that might be a good thing. There is no excuse for this level of lack of professionalism or even common courtesy.

Also at the end of the week, I had the disappointment of missing out on a bank repo house because it took too long to get my buyer pre-qualified for the mortgage - or so it seemed. The bank repo market is sort of the wild west of real estate right now, with things happening fast and furious and "buyers" occasionally magically appearing out of the woodwork, right after a legitimate offer has been made. I guess it's just part of the real estate landscape.

Your full service scam company

I saw an interesting real estate sign in front of a house yesterday that claimed to be a combined real estate and financing company. That’s unusual and I thought that all they would need to do is to add an appraiser into a company like that to have the complete mortgage fraud set-up. Now to make the picture complete, it would be great if the principals were Ralph Dewey, the real estate broker, Roger Cheatum, the mortgage broker, and William Howe, an appraiser. They could call the company Dewey, Cheatum & Howe. I’d love to see that on a real estate sign. I’ve included the appropriate graphic for the sign above.

We are still seeing new cases of mortgage fraud, even after all of the news spotlight and actions at the state and federal levels. The current round is, in some cases, actually piggybacking off the foreclosures of the earlier round, by picking up foreclosed houses at sale prices that are inflated over the foreclosure prices (with perhaps some seller’s concessions at closing) or by flipping the foreclosures at the normal (pre-foreclosure) price (perhaps to a fake buyer) and scrapping off the instant equity. Of course most of the “principals” involved in those deals are never seen again.

Another scam is to buy the house out of foreclosure with a 100% mortgage and then rent it out. The scammers make no payments on the mortgage, but they get 6 or more months of income from the renters, until the next foreclosure eviction occurs. Sometimes the renters know what’s going on; but many times the eviction notices surprise them, too. There’s a scammer for every occasion.

Of course, we’ve all seen stories and articles about the “foreclosure workout” companies that are themselves scammers. They convince the unsuspecting homeowner to sign over the deed to their home as part of a workout plan. They make no payments either but may turn around and sell it to a third party (sometimes also a scammer) and make off with the proceeds. The new “buyer” usually turns out to be in on the scam and may even be using a stolen identity. It just gets deeper and deeper. There are some good credit advice companies out there that specialize in helping homeowners work things out to avoid foreclosure. Go to my Web site http://www.themilfordteam.com and click on Foreclosures and Short Sales in the left hand menu bar to see a few that I’ve found.

Oh, Rats...

Earlier this morning I posted a smiley face with a message that I had my system back. Well, that proved to be short-lived. It blue-screened on me shortly afterwards. So, it's back to the repair shop, this time to have the system totally re-initialized and I'll have to spend time re-installing everything. Rats!

On the local real estate front, the Detroit News had a big headline on the front page that screamed out that local builders have discovered that people can't afford their new build houses. Well, DUH! Most builders started building McMansions everywhere and now they're surprised that no one can afford them. Perhaps it's because so many of Michigan's manufacturing jobs are now in China. Maybe we should ship the McMansions to China, too. No. That wouldn't work. The Chinese would just paint them with lead-based paint and ship them back as Barbie houses. I'll discuss the whole issue of us, as a nation, shifting to a service-based economy and what impact that is having on real estate and otehr things, but not today.

I've yet to figure out what the Presidents recent attempt to display awareness of the situation will mean. According to various reports several thousand overextended people may be helped by his proposed actions, but not enough to change the tide of the current sub-prime mortgage mess that we're in - sort of like the Iraq situation, but that is another can of worms that we won't get into here.

Now that official Washington is aware of the situation and mobilizing to save us from ourselves, heaven help us. There's nothing scarier that a bunch of Washington politicians trying to tinker with things. But, it could provide some amusing television for a while and they hold hearings and try to find someone to blame. Lots of pontificating and finger pointing will ensue. I noted in a recent magazine article that many of the same faces that were a part of the last few rounds of financial scandals - the S&L mess, the hedge fund meltdown and others are again at the core of this mess, too. Talk about bad pennies coming back.

Elsewhere, the National Association of Realtors reported another down month for existing home sales in July and expects the same for the August data. NAR is now starting to report (or perhaps hope) that there is "pent up demand" in the system. I certainly hope that is true. In Michigan, as elsewhere, there certainly hasn't been a lot of home buying, so that demand, pent-up or otherwise, is somewhere. If you have pent up demand, call me and I'll help you find a new home - new or used.

Separation Anxieties

Day 2 of Norm without his home office computer and it's not a pretty picture. I guess that you don't realize what a big part of your life being connected has become until you lose that connectivity. I found myself feeling strangely disconnected from what I guess has become my world - email, the Internet, my Web applications and sites, many of the things with which I spend my time at home.

I watch little television anymore, because there is always something to be done on-line. I maintain 5 Web sites, so they take up a good bit of time. Then, there are the needs of the 30+ home buyer clients that I've got in various stages of looking. Much of the daily contact with them is through automated searches, but there is normally some weekly personal email contact. Then there's email itself, which averages 50-60 message a day. I can get to them from the office systems, but I can't use my Outlook there to file the ones that I want to keep, so the ones that I want to save are piling up in my account. Of course I can get to this blog from the office systems, too; so I can keep posting, but it's somehow just not the same.

I get the same way on vacations. I can go 2-3 days without having access to my "stuff", but after that I get antsy to get back to it. That drives my wife nuts; because, she is able to just kick back and let go of the stuff at home for up to a week (then, even she starts missing our dog and the comfort of the home routines). I suppose that a psychiatrist would call this some form of separation anxiety; or some other polite term to describe a person who becomes a basket-case, if his computer goes down. I don't care. I just want my system back up and my connectivity to the Internet world back at my home office. I hope that the repair guy gets it fixed and back to me tonight; otherwise I'll be the guy howling at the moon off in the distance.

Hoist by my own petard

Last night I experienced first-hand the effects of the the phrase "hoist by his own petard". I hosed up my home office computer system by being impatient and pulling the plug (literally) while it was in the middle of a freeze-up. That's apparently a big no-no. Now it won't boot up at all. So, it's off to the repairman again and having to work on whatever computer I can find.

My father-in-law, before he passed away years ago, used to use that phrase all the time. I go to thinking about what that old phrase actually means and how it got started. My father-in-law had told me that the pitard (the spelling that he used) was (is) a small belaying peg used on sailing ships. In his version, every sailor had his own pitard, which he carried with him to use to belay sail lines. When sailors were occasionally harshly disciplined by being strung up on the yard arms; to add insult to injury, they used the sailor's own pitard to belay the line that they hoisted him with. That certainly seemed appropriate to my situation, as I was blowing in the wind in front of my dead computer.

I also "Googled" the phrase - doesn't everybody Google everything these days - and got a different answer. Apparently a petard (different spelling) was a small explosive device used by invading armies during the Elizabethan age to blow open doors and walls. The engineers who created these and other war engines for the armies were sometimes blown up (hoisted) by the very petards that they had created. Shakespeare even commented on it in Hamlet, act III, scene 4, lines 206 and 207: "For 'tis sport to have the engineer/ Hoist with his own petar...." Again that was a good match for my situation.

So, now I sit in my company office on one of the shared computers trying to get by with just email and access to a few of the applications that I need to do my business. I'll probably spend the rest of the week trying to recover from this experience, since even getting the computer running again doesn't guarantee that I won't have to re-install most of my applications. I'm truly hoist by my own pitard (or petard).

Human Nature

I am constantly amazed by the incredulity that is displayed in the media, and by people in general, when some "trusted figure" comes up in the news as having committed some crime. Just lately it’s the Idaho Senator in the men's room; but, locally we've also had the police chief having sex with a minor and a soccer mom who embezzled money from the soccer club. Nationally we've had the sex scandal involving Catholic priests and now an unfolding scandal with Boy Scout leaders. The media headlines always scream the question "How could a person in a position of trust do this?"

Well, DUH! It's human nature. What is more amazing is the thought that, just because someone is put into a position of trust, somehow basic human nature is suspended and traits like greed, and lust and dishonesty and self-indulgence somehow are negated by the position. It’s another, unwritten human trait that lets us believe that everyone is basically honest, until they prove otherwise to us.

Now stay with me here, because I'm walking a fine line between common sense and cynicism. Common sense would dictate that systems have checks in place to make sure that abuses are caught, even if they are not expected. Cynicism would say that the checks are needed because you expect the worst of people. Wow, that is a fine line! Common sense might encourage the checks and balances as a way to help fight any temptation for those in positions of trust. Cynicism might say that you really can't trust anyone; and, that every position of trust needs tight oversight. That would certainly be a sad trap to fall into.

My point, I guess, is that I find it amusing (I suppose in a dark-humor kind of way) that people express such surprise at the out-ed priest or police chief or soccer mom crooks. Why would anyone choose to believe that just because you are a priest or a Boy Scout leader you can't possibly be a sex offender; or, just because you are a soccer mom, with kids on the team, that you can't be the one to embezzle money from the soccer club to pay for your gambling habit. What possible part of the appointment to those positions would cause basic human nature to be suspended and cause those people only to do right because of the position? OK, the priests might have the strongest case on that point. I’ll admit that I’m as trusting as the next guy, when it comes to these things. I always give the benefit of the doubt to people and believe that they’ll do the right thing; however, I’m also not shocked, if it turns out that they didn’t – disappointed maybe, but not shocked. That is, after all, just a part of human nature, too.

In real estate, we go to great lengths to try to insure a truthful and transparent transaction. We require a Seller’s Disclosure and Lead-based Paint Disclosure on every house and we require the buyer to read them before making any offer. On both sides of that process are Realtors who are in positions of trust, advising the parties. Yet we still get lawsuits every year from buyers who discover later that the sellers “forgot” about some major defect in the property. Most sellers try to hide behind a defense that they misunderstood the question(s) on the forms – like answering “No” to the question about evidence of water in the basement, because once it was cleaned up there didn’t appear to be any evidence. Sometimes I’m reminded of the TV tapes of President Bill Clinton eluding some of the questions about Monica Lewinsky by asking what the definition of “is” is (or something like that). One reason why we do the home inspections prior to closing is to find those defects that the homeowners either didn’t know were there or which they conveniently forgot about on the disclosures. Whoops! I crossed over the line into cynicism there for a moment. But, that’s just human nature, too. Now I have to go off and be disappointed in myself.

Foreclosures and taxes

I've run into the interesting situation lately where some buyers that I've been working with have found some really nice foreclosed homes that they thought that they could buy, only to find out that the taxes put them way over their financing limits. That's particularly true at the low end, where young, first time buyers are perhaps trying to buy more home that they could normally afford by looking at foreclosed homes. They go out and get "pre-qualified" for a mortgage that is right at the top of what they can aford and then start looking for houses at that price.

I have shown lots of foreclosed home that were $300-400K homes a year ago that are now selling in the low $200K's. Sounds like a great deal, and some are - the ones that weren't thrashed by irate previous owners. The kicker that comes into play to prevent some of my buyers from taking advantage of these deals are the property taxes. In Michigan, as I suppose occurs elsewhere, the property taxes continue to be based upon the last appraised value (the one that still reflects a $300-400K home value) and not the foreclosure sale price. So, that deal at $200K may actually bring a tax bill with it as if the buyer paid $400K.

This shouldn't come as a great surprise, since the current taxes are listed right out in public on the MLS tickets. I try to point that out to clients, but many are in their own little worlds with visions of owning this great, new house. It's only when their mortgage person finally totals up the monthly payment, with taxes and insurance included, that they finally realize that another dream has been dashed. I've resolved to be even more diligent, up front with clients to make sure that they understand the tax situation. Local governments aren't likely to give anyone a break on the taxes, since they need the revenues and they hope that new owners will quickly get the places back to the condition that justified the old taxes anyway. So the old saw - "Look before you leap" - now applies to the taxes that your wonderful foreclosure find might have trailing along with it.

Arrogance in real estate

I saw this saying (or words that said the same thing anyway) recently – “Self-confidence is arrogance restrained.” I thought, how appropriate for real estate and for many of the Realtors that I know. There are a good number of very professional, very self-confident Realtors in the area. And, there are a few that have unrestrained egos and are just plain arrogant. That’s not just my opinion. I hear it from their ex-customers, too.

Unfortunately customers don’t always realize that the bravado and bluster that they are getting during an agent interview is arrogance and not just confidence or even competence. When Mr.(or Ms.) Bluster (how many of your can identify where that name came from – see below) comes in and throws down a stack of ads or real estate books with their ads or shows you a few dozen pages of houses that they have sold, they’re just trying to bully you into signing with them - “they must be the best, because they said they were.” They won’t want to discuss open houses with you, because they’re too busy for that. And, they’ll likely be fairly high-pressure about getting you to sign right then and there. They really don’t have time for another trip to your house.

All too often that’s the last time that you’ll see that superstar agent, unless he/she needs to come back to get you to re-up the contract. You’ll get assigned to one of their “assistants”, while they’re off to bully the next potential client. I find that to be a display of shameless arrogance, but it’s also based upon one of the prevalent business models that many Realtors use – book as many listings as possible, spend as little time and money as possible and let the buyer agents do the work. To them it’s just a numbers game and your home is one of the numbers.

If that were the only road to success in real estate, I’d never get there from here. I’m much more attuned to getting to know my clients and understanding their needs. I prefer to work with a smaller number of listing; usually under 20 at any time, so that I can get around to each one every week. I’ve also shifted away from the old paper-based advertising model into a more Internet-oriented model – multi-pictures and virtual tours. So, I don’t have lots of real estate books to throw down, but we could go visit the 120+ Web sites where your home will be featured and were today’s buyers will see it. I may miss the crowd that grabs a real estate book on the way into Leo’s Coney Island for breakfast, but I’ll catch the young professionals who sneak some time on Realtor.com or Yahoo or Trulia at work at lunchtime; and, I’m OK with that. I’m confident that my sellers are getting the best exposure for their homes, without being arrogant about it.

By the way, Mr. Bluster was a character – a puppet actually – on the old Howdy Doody Show. If you remember that, you’re about my age. Call me and we’ll discuss what real estate transition you might want to make as you head into retirement. Me, I've decided to age in place, see my post of August 24 on "Aging in Place."