The bucket brigade...

Way back, near when I first started this blog, I reported on a stress relieving mechanism that we had been trained on in the office that involved staring at a green dot on the wall, while holding one leg up. If you recall, I had created a special green dot that had the words "So, what?" inside, as a further mechanism to relieve the stress of life in the real estate world.

Recently we instituted a program in the office based upon the children’s book – “Have You Filled a Bucket Today?” by Carol McCloud. It’s another self-help book about how we all carry around emotional buckets and how what we say and do as we interact with fellow workers, family, friends, or clients either adds to their bucket (a good thing) or takes from their buckets (not good). The bucket metaphor apparently refers to our self esteem and how giving people compliments or saying something nice to someone can help build up their self esteem and how saying something negative does just the opposite. The theory also holds that as you fill someone else’s bucket, yours fills too - you feel good by making others feel good.

The same theory applies to how you express your outlook on things in general – the world around you. If you are always negative about everything, that takes from the buckets of others and from your own bucket. So, saying negative things about your work or the real estate market, for instance, might be cause for buckets to be emptied – both your own and those of the people around you. Filling a home seller’s bucket in the current market can be a big challenge, but not even trying can empty his/her bucket even faster.

There’s certainly no doubt that we can all use positive reinforcement these days and the bucket metaphor is an easy one to physically implement in the workplace – we have little buckets setting around the office with little slips in them that one can fill out to record whenever someone does something nice or says something nice to a co-worker (fills someone’s else’s bucket). It’s not unusual to overhear someone saying “Thanks, you filled my bucket” to a co-worker, or “Get your hand out of my bucket!”, if the co-worker has done/said something negative.

So, now we have green dots and buckets. Sounds a bit like Dr Seuss’ Green Eggs and Ham, but, in this case, it is much more practical because now we have a place to store our green dots. Maybe I’ll just paint my bucket green. That way I can put it on the wall and stare at it. Oops, did I just put a hole in my bucket? Not to worry. I’ll patch it with this handy green dot.

Four Big Mistakes Home Buyers Should Avoid

Buying a home is likely the biggest decision that most people will make in their lives. Though many will do this more than once, there are four mistakes that are common, no matter how often you might buy. In fact, the more often you buy a new home the more likely you are to make one or more of these mistakes. Mainly because you might believe that your past experience means you can skip over one of these points. Don’t believe it. Making these mistakes on your 10th home can be just as costly as making them on your first. So, take a minute and read through this short list of common mistakes.

Mistake #1: Thinking you can't afford it

Today, buying the home of your dreams is easier than ever before. Many people who thought that buying the home they wanted was simply out of their reach are now enjoying a new lifestyle in their very own new home. With prices depressed to their lowest levels in a decade and lots of foreclosed houses to choose from too, there will likely never be a better time to buy.

Buying a home is the smartest financial decision you will ever make. In fact, most American home owners would be financially broke at retirement if it weren't for one saving grace - the equity in their home. Furthermore, mortgage rates are more flexible today than ever and tax allowances favor home ownership.

Real estate values have historically risen steadily. Of course there are peaks and valleys and we’re definitely in a prolonged valley right now, but over the long term the trend is a consistent increase. This means that, unlike renting an apartment, every month when you make a mortgage payment the amount that you owe on the home goes down and the value typically increases. This owe less-worth more situation is called equity build-up and is the reason you can't afford not to buy. To read more about making the rent vs. buy comparison, go to my Web site – TheMilfordTeam.com and click on the First Time Buyers choice.

Even if you have little money for a down payment or credit problems, chances are that you can still buy that new home. It just comes down to knowing the right strategies, and working with the right people. The keys are having a good agent (see below) and a good mortgage person (next topic). With recent changes in the law to modernize the Federal Housing Authority (FHA), almost all first time buyers should qualify to use an FHA program and many move-up buyers may, too. The upper limit on FHA mortgages is expected to go up significantly, once he FHA Modernization Act becomes law.

Don’t compound this deadly mistake by trying to time the market to get in at the absolute bottom. We will be bumping along at, or near, the bottom in Michigan for much of 2008 and perhaps some of 2009, but most of our big value declines have already taken place, so now is the time to be looking for the best house that you can find at a depressed (or foreclosure) price and not to be sitting by telling yourself that the market is still going down and you need to wait. The great houses will be gone by that time and having the pick of the litter (used in the garbage sense here) later will be an empty victory, compared to getting the house of your dreams at a great price now.

Mistake #2: Not having a local Mortgage Broker

There is a tendency these days to think that almost everything can be accomplished “on the Web.” While it’s true that much of the research that you may want to do can be done there; when it comes to getting pre-approved for a mortgage, there is no substitute for having a real, live, local mortgage broker to work with. I have seen case-after-case of on-line e-This or e-That mortgage companies bowing out of the picture and reneging on their “pre-approvals” once an offer is in and they finally send the “pre-approved” client through underwriting for the actual approval of his/her loan. Those people are sitting somewhere in California or Texas or Florida and have no idea what’s happening in the Michigan real estate market until they have to make a real commitment of their money. Then, they come back with vague mutterings about Michigan being a “declining market” and how the pre-approval they gave you before is changed by that. Well, duh! You’d think that they would know that if they’re in the mortgage business.

Get a local mortgage broker. Get a live person, with whom you can actually meet and discuss your situation and your options. Don’t wait to be surprised, after you’ve already made and offer on the house that you want, to find out that the great on-line deal that you thought you had lined up is just as ethereal as the Internet itself. Why a broker and not just a direct lender, such as your bank? Mortgage brokers have several funding sources available - banks and private equity funds - so they can shop around for the best deal for you. They often have more programs available through these sources, so they'll find something that best fits your particular circumstances and needs. Call me, I’ll hook you up with Agnes – a real, live, mortgage broker who will take care of you for a mortgage.

Mistake #3: Not hiring a buyer's agent to represent you

Buying property is a complex and stressful task. In fact, it is often the biggest single investment you will make in your lifetime. At the same time, real estate transactions have become increasingly complicated, especially in the world of foreclosure houses and FHA mortgage programs. For many home buyers, the process turns into a terrible, stressful ordeal. In addition, making the wrong decisions can end up costing you thousands of dollars. It does not have to be this way! An experienced buyer’s agent can lift that stress from your shoulders and make sure that you get the best deal and make good real estate decisions.

Buyer's agents have a fiduciary duty to you. That means they are loyal to only you and are obligated to look out for your best interests. Buyer's agents can help you find the best home, the best lender and the best inspector. Best of all, in most cases, the buyer's agent is paid out of the seller's commission, even though he/she works for you. The buyers agent is likely the best “free” thing that you’ll get out of the whole buying process.

Don’t make the common mistake of just calling whoever is on the sign in front of the house. That person works for the seller and CANNOT work for you, too. They may be friendly and, oh, so helpful, but at the end of the day, they have a signed contract to work for the seller and unless they get written permission from the seller and from you, they cannot become agents for both sides. They will always work for the seller. So, just remember that and don’t blurt out anything that might give the seller some negotiating advantage to that agent; because, they are bound by their contract with him to share that information. Get your own buyer agent to represent your best interests and protect your confidential information. For more on agency, go to my Milford Team Web site and read the page on Real Estate Agency and You, under the General Real Estate Topics heading.

Mistake #4: Getting a cheap inspection

Buying a home is probably the most expensive purchase you will ever make. This is no time to shop for a cheap inspection. The cost of a home inspection is very small relative to the home being inspected. The additional cost of hiring a certified inspector is almost insignificant – generally in the $300-400 range, but dependent upon the size of the house. As a home buyer, you have recently been crunching the numbers, negotiating offers, adding up closing costs, shopping for mortgages and trying to get the best deals. Do not stop now. Do not let anyone talk you into skimping here. And please, don’t fall into the “I’ve got a buddy in the building trades” trap. It’s great that you know someone who’s in the trades, maybe a plumber or and electrician or even a carpenter. They can help you later and maybe save you some money then. At this point in your decision process, however, they most likely can only hurt you. As good as they may be at their trade, they are not trained heme inspectors and just do not know enough about all of the things that a good inspector will look for in the house.

There are no state licensing requirements for home inspectors in Michigan, so lots of ill-qualified or under qualified people are running around with business cards that say they are home inspectors. Look instead for a certified home inspector, one who is certified by one of the 4 major home inspection certification organizations – ASHI, NACHI, NAHI, and AII (click on any of those to those if you want to see what they stand for). If the certification symbol from one of those organizations is not on the person’s business card, take a pass; that person is either too lazy or may be too under qualified to take and pass the certification tests.

If you’re buying in the winter, and especially if you’re buying a foreclosed house, the cost for a good inspection might include the extra cost of de-winterizing and re-winterizing the house.(about $200 more), but don’t even think of saving money by not doing that. You cannot tell a thing about the condition of the plumbing or the water heater with the water off, which is mostly what winterizing is all about. You may also have to have the their utilities – electric and gas - turned back on for the day of the inspection; but again, you cannot do an inspection without them, so bit that bullet too. In some places the utility companies will charge your for turning the gas and power on and back off. Just do it! Not doing that would be like buying a used car without ever starting up the engine – just plain dumb.

So, if you’re a buyer or about to become a buyer, take care of those four things and you’ll be ahead of the game. You’ll notice that whether it’s the mortgage person helping you figure out what you can afford or the real estate agent helping with find the right house and negotiating the deal or the inspector making sure that you under stand the condition of the property, it’s about having people to help you. Like they say in that TV ad for tax preparation – relax you’ve got people! Do you have people?

Read the tea leaves or watch the stats…

Trying to discern the future direction of the real estate market is probably not as difficult as trying to read the future of the stock market, but it’s close to being that difficult. One can play hunches or listen to the pundits on the nightly news; however, like stock market, there are trends that can be spotted in data about a particular market if one tracks it over time.

As someone whose income depends upon the real estate market, I tend to watch the data that is available from the local Multi-List Service (MLS) for the markets that I focus upon. I’ve been sharing some of that data – the Days On Market and Inventory levels for active listed houses on a weekly basis - on a Real Estate Statistics page on my Web site www.themilfordteam.com and information about what’s sold recently in the Milford area on a similar page on www.movetomilford.com. The data on what’s sold allows you to see the DOM for those houses and the average sold vs. ask percentages, as well as the calculated ratio of sold vs. SEV values. The sold price vs. SEV values have tracked down to between 1.3 and 1.5 over the last 2 years (as opposed to the 2.0+ that they were for years).

For 2008 I expanded the data that I track in a wider market area that includes Milford (Village and Township) and the townships of Highland, White Lake, Commerce, and West Bloomfield. I now track on a weekly basis data on the number of houses that sell that week, the median asked and sold prices, the Days On Market (DOM) and active inventory, as well as a calculated number that shows how many months of inventory is active for that week. I still track a smaller market for just the houses that sell weekly in the Huron Valley School District (all of Milford and Highland Townships and parts of White Lake and Commerce Townships). You can also get to these stats from my MIHomeBuyer.com site.

So, if you’re into statistics, you might look for trends in this data that would tell you that the market is turning back towards a better balance:

1. DOM should be trending down. In some price bands that I track DOM is now at or above a full year. In the $400-500K price band in the Milford area, for instance, it is now almost 1 ½ years to sell. In a few markets in the area (none that I currently track on a weekly basis) the DOM for upscale houses is over 2 years.

2. The median sold price should start to trend up, as will median listed price. Right now the median sold price number is greatly impacted by the number of foreclosures being bought. Having to compete against foreclosures has also brought down the median listed price.

3. The number of months of inventory (how long it would take to sell off all of the houses in a market at the current monthly sales rate) should also trend down, with 2-4 months being a lot more normal than the 8-12 months that we are currently seeing (with some areas well over 12 months of inventory in certain price bands).

4. On the sold front, one should start to see the sold prices vs. SEV values creep back up towards 2.0, if for no other reason that assessors may be forced by angry taxpayers to get assessed values back in line with reality. Remember that SEV is supposed to represent 1/2 of the assessed value of the property, so 2.0 times the SEV number should be what the property would sell for at full assessed value. For years that was the case locally. In the market today, we are consistently running at between 1.3 and 1.6 times SEV (varies by area) for average sold prices.

5. As the market stabilizes we should also see the sold/ask ratio creep back up to a more respectable 97% level - right now that ratio is all over the place with an average likely in the low to mid-90% level.

6. The total inventory levels on both of the market areas that I track should also trend down, as excess inventory is worked off.

7. Although I don't track this stat, you'll also see new housing starts trend up, once things return to a more normal state. You'll read about that in the papers and see/hear it on the nightly news.

Since I just started tracking the wider market that I mentioned above, there is only data there for one month so far. For the smaller Milford area market that I’ve been tracking for some time, I saved the last three months of 2007 as PDF files and make those available on the site. I’ll be saving all of the 2008 months, so we’ll have a historic base for comparison later.

I’m no data or statistics junkie, but I do find that having data like this available makes it somewhat easier to discuss with clients what’s happening in the market and what the trends appear to be. Every now and then I still “go with my gut” on a recommendation, because there are factors other than what the data show occasionally at work in a market. Sometimes tidbits of information that one can pick up from around town are as valuable as all of the data on all of these charts. And, isn’t that the real reason that having a local real estate agent is important?

So, go to my Web sites and enjoy the data that I've gathered and put there. Call me if you're planning to sell so that I can do specific research for your area and give you the best advice possible on how to price your house for your market.

Living in no-mans land…

One result of the recent malaise in the housing market is the dramatic increase in stalled-out housing developments. Just in our little Village of Milford, Michigan I count 8 out of 10 developments in and around the Village as stopped or stalled. Only two are still building and one is crawling at a snail's pace, hoping to attract a buyer before much more work is done.

The reasons for this phenomenon are easy to understand – there are no buyers for the houses and the builders have (or will shortly) run out of money. In most cases the developers have done what they are expected to do – put in the infrastructure, such as streets and utilities. Many developers then sell off the lots to builders, who might put up a spec house as a sales model. Some developers are also the builders, especially the small local firms. In most of our stalled developments there is at least one spec house or model up. Unfortunately some look like the picture above, because the builder ran out of money before he could even finish it or decided not to go any further without a buyer. We’ve actually had a few companies locally go bankrupt and get out altogether. A couple of the larger companies building in the Highland area sold off the whole development and exited the state. One later went bankrupt at a national level.

So what is the home buyer to do, who got in early and now is living in a wasteland, surrounded by empty, weed-choked lots or boarded up, partially finished houses? That pretty much depends upon whether the developer and builders are still around or have gone bankrupt. Obviously, try to call the builder and developer first (but don't be surprised if the number that you had for them is disconnected). If you can’t get any answers or satisfaction from the developer/builders about maintenance in the development, you can check with the local city, village or township government to see what they know about the project status and the developer/builders. If the developer and builders plan to stay in business in the area, they can’t just ignore these local government bodies.

You can also check with and lodge complaints with the local Better Business Bureau. Most small outfits would likely belong to the BBB and the local Chamber of Commerce, which are other sources for information and outlets for complaints. If the original developer/builder has gone bankrupt or sold out to a new owner, you should also find out what they new owner’s plan is for the development. It doesn’t necessarily have to be the same as the old plan and you may find yourself surrounded by houses of a completely different design and quality level. As long as any changes in the plans don’t move significantly away from the price band of your home, you should be OK. Most local zoning boards wouldn’t let that happen, but you never know for sure.

Hopefully, your builder is not involved in law suits with sub-contractors; otherwise, you might find that a lien was slapped on your home from one of these contractors. If so, hopefully you have a strong Title Insurance Policy that covers that contingency. If you’re buying into one of these stalled out subs, because of the great deals that are available, make sure that you ask for an Eagle Brand Title Insurance Policy, which will cover that issue.

As for what to do about other issues, such as maintenance of common areas and un-built lots, this is where the old “squeaky wheel” theory comes into play. If there is still a developer involved in the project, try to talk with him first. A good developer will do what he can to try to keep the development presentable, so that it can attract future buyers. You can’t ask for the moon, but asking that he send in a tractor with a weed mower once-in-a-while, to keep the weeds under control might be reasonable. If nothing else, you should be able to identify through the developer or the local government, who the builders are that own the lots and how to contact them about keeping their empty lots up.

As a final resort, most local governments have ordinances concerning maintenance of properties and you might be able to get the city/village/township to take the owner to court. They city/village/township often needs to be prodded by unhappy homeowners (and voters) in the stalled sub before they’ll take action. Then they can get the court to order that they contract with a clean-up crew to take care of the maintenance and bill the owner. That process may take a while, but it will eventually work with even the most intransigent owners. The whole process of what to do and whom to talk with may be made worse if the developer/builder(s) have declared bankruptcy and now the development is owned by a bank somewhere.

The hardest thing to do in this situation may be to sell a home that you just purchased recently in one of these stalled developments. If the development is close to being finished or is relatively small and surrounded by finished neighborhoods (a small “in-fill” development) you may be OK. But if your new home is sitting as the only finished house on an otherwise big, empty street, it is just not very appealing to would-be buyers. Hopefully you got a great deal and can afford to let go at or only slightly below your cost.

Eventually the housing market will shift back to a better balance and someone will likely com in and finish your development. Hopefully they will do so using houses that compliment yours and keep the development in line with the developer’s original vision. Until that time, you and what few neighbors you have may have to become “squeaky wheel” activists with the developer/builder(s) and local government to keep up the area surrounding your “country” home.

Taking an active role in the selling process

We are certainly in what could be called a stalled market in southeastern Michigan. It could be called many other things and has been by sellers for the last couple of years, but we won’t go there. Let’s leave it at this – there are more houses on the market than there are buyers right now, so you have to do more to be competitive in this market. It is also a declining value market, which puts extra emphasis on price as the key element to selling.

I’ve talked here before about the things that you can and likely should do to improve the marketability of the house itself. Mini-makeovers and catching up on maintenance are two things. We’ve also discuss here the importance of properly pricing you house to the market. Here are 10 things that you, as a seller, should do as an active partner in the selling process itself to give yourself the best chance of selling quickly in this market:

1: Get a local agent. In a slow market there are relatively fewer buyers. It follows that to generate the most demand you want your property exposed to as many potential buyers as possible. Who do buyers contact when they want a house? Local agents. Figures from the National Association of Realtors® show that 85 percent of all buyers rely on real estate agents when buying a home while 80 percent rely on the Internet. Who posts real estate information on the Internet? Local real estate brokers. I’ve also advised and will repeat – get a full-time Realtor®, not one who works your needs in around the time demands of their day job.

2: Read the sale agreement for your area. Virtually all state real estate associations have a standardized real estate Purchase Agreement contract, most of which have become lengthy and complex. If you eventually sign one, when an offer comes in, then you're automatically agreeing to all unmodified terms and conditions; so read the entire standard agreement for your area, so you know what is being said. Look to see if there is something in the standard agreement that should be changed, removed or added for your specific case (see the EMD discussion point below). Ask your agent to provide a copy of the Purchase Agreement that the local Association of Realtors uses. You should take the time at the front-end of the process to read it and understand the terms and conditions. You don’t want to try to do that during the heat of negotiating and offer that has come in. There may be variations from real estate company to company, but by-and-large most of the companies in a state will use some variation of the form that has been created and accepted by the state’s real estate association (MAR in the case of Michigan). Since these are form agreements, anything not required by law can be changed with a suitable cross-out or addenda. For details, speak with your agent or your attorney. This is not to say that you won’t need to thoroughly read the Purchase Agreement document that you get later with an offer. You should always do that; but, at least you’ll have had time to think about the terms and conditions that you’ll likely see in the offer and maybe even be able to spot things that are different and may not be in your best interest.

3: Know the local marketplace. In terms of negotiation it's not good enough to know recorded sale prices because they frequently don't tell the whole story. For instance, two homes may both have recorded sale prices of $500,000. One may actually have sold for $500,000 while the other sold for $500,000 but the owner gave a 3 percent seller credit to the buyer for a new roof and appliances -- that's $15,000 off the top. Local agents who actually make sales know the details of recent transactions are thus are in the best position to provide negotiating advice.

4: Decide on your terms. You know your property will sell at some price point, but rather than a given price it's best to think of a home as a package of price and terms. For instance, in a slow market it may be better to pay a "seller contribution" to help buyers off-set closing costs than to lower the sale price. In many cases, the seller contribution may be smaller than a price reduction and much more attractive to buyers who need cash to close. In our local market offering 3% towards the purchasers closing costs and pre-paid items is not unusual. With the changes that are taking place in the market you should also look at offering FHA and VA options for mortgages, in addition to the standard Cash and Conventional Mortgage options. The FHA option will be especially important in the lower end of the market. The FHA requirements have changed and are now very reasonable, compared to a convention mortgage.

5: Reduce earnest money requirements. To make a contract work there's a need for a buyer deposit, the "consideration" necessary to bind a deal. If you're a seller you want the largest possible deposit, but in a slow market you may have to settle for less. Buyers, for their part, want to make the smallest possible deposit if only because a big deposit represents a huge psychological commitment. Requiring less earnest money deposit (EMD) may be appropriate if the buyer is pre-approved for a loan, the purchasers have a strong interest in the property and no better offer is in the picture. The primary rationale for big EMD’s used to be that this was money to potentially compensate the seller for taking the home off the market for some time, only to have the buyer back out for no good reason. In today’s market, with inspections required in the 7 days after acceptance of the offer, you’ll know fairly quickly if the buyer is going to back out. You might also use a technique that the banks do with foreclosure homes – accept less EMD, but make it non-refundable once the buyer accepts the inspection results and releases that contingency. That way, if the buyer runs into credit issues later and has to back out because of an inability to get a mortgage you get something for taking your house off the market.

6: Throw in stuff. Do you really want to move a swing set or a washer/dryer? In some cases it may be best to "reluctantly" part with such items, if only a buyer will make an offer. Pool tables are a favorite throw in item and a bear to move anyway. You should make up your mind ahead if you are willing to throw in things like the washer and dryer and discuss with your agent whether to offer them up-front or hold them back as a negotiating tool. Just be ready to commit them, if the buyer asks.

7: Make sure your agent updates the MLS photos and the photos on virtual tours and other Web sites. If it's February and your MLS photo shows a green yard with leafy trees surrounding your gleaming pool, then buyers can guess that the home has been for sale for a long, long time -- meaning the price and terms may be more negotiable that you’d like. You should go look at the various sites that your agent told you would have your home on them to see what the buyers are seeing.

8: Review the marketing plan that your agent showed you in the listing presentation. The marketing plan developed by your agent should be reviewed as often as necessary to assure that; one, it is being followed and; two, it is changed as necessary. However, don’t try to micro-manage the marketing process. If you trusted your agent enough to list with him/her, then let them do their jobs for the listing period that you signed up for. Asking for reports on things like Web site hits on your house or on the virtual tour will give you an idea how things are gong and give you a context within which to have a discussion with your agent. If your agent really hasn’t done any of the things that he/she promised have a sit-down meeting with him/her and find out why. If you’re not satisfied with the answer – fire him/her and find a new agent. You really don’t have to put up with a lackadaisical effort.

9: Visit open houses. It's always good to visit open houses to see the local competition. It's not easy to be objective, but is there something other owners are offering which might work for your property? Something you can make into a bargaining point? Maybe an offer to re-paint the living room in a color of the buyer's choice is not a bad idea. Keep in mind that this isn’t a home decorating idea tour, but a recon mission deep into competitive territory. Take notes after each house and compile them for discussion with your agent later.

10: Keep the big picture in mind. It's silly to worry about small costs and concessions when your core goal is to sell the home. I’ve seen sellers come within $1,500 on a $200,000 home sale and walk away. Once you get that close, a closing should be the next step – keep the negotiations alive. Don’t retaliate against what you might consider to be a petty request for a $500 concession for some small item by saying no and breaking off negotiations. You’ll only be hurting yourself. Buyers are asking for everything these days, because they know that there are likely 10 more houses just as good as yours out on the market. Once you have someone committed to the stage of having made and offer and engaged in the negotiation process, you need to do everything possible to bring the process to a close. This is the final area in which you need to show trust in your agent. The agent on the other side has done his/her homework and shown their client the comparables. Your agent may have his/her own list of comparables to justify the pricing advice that they are giving you. This is not the time to hold out for what you hoped the house was worth. It is the time to realize that the market (and likely both agents) is telling you what the house is worth today. If you’re going to ignore your own agent’s advice, then perhaps you need to step back and re-ask yourself if you really want to sell. If the answer is still yes (or maybe I have no choice) then, bite the bullet and negotiate in good faith, not based upon false hope.

All of these items assume that you are taking an active role in the selling process, which is a good idea; otherwise you reduce your role to just saying yea or nay to offers that may dribble in.

Old dog learning new tricks...

“If you always do what you always did, you’ll always get what you always got.” (Unknown), from the Jack’s Winning Words blog. This is a variation on the classic definition of insanity, which is “doing the same thing over and over and expecting different results.” In a classic self-help sense, realizing that this is true is a starting point for change.

Applying that thought to the current insane real estate market has led Realtors to try all sorts of “out-of-the-box” thinking and new marketing approaches. The rise of auctions for houses that have been sitting on the market is one thing; that, while not new, has certainly increased in use in the last 12-18 months. Realtors are coming up with all sorts of added “incentives” aimed both at the potential buyers and at buyer agents, trying to generate traffic and interest in their listings. As a Realtor, it is possible to get a free lunch almost any day of the week at one “broker open house” or another. So, being a Realtor can be fattening.

Another thing that has changed quite a lot in the last 2-3 years is the use of the Internet as a primary marketing tool. A new saying in real estate is that Web appeal has replaced curb appeal. That’s true because so much of the buying public now do all of their preliminary searching on the Web. That has led most agents (at least the smart ones) to focus more on how their listings are presented on the various Web sites. Multiple pictures and virtual tours are a must. I’ve had clients tell me that they just skip over listings that only have one picture or some small number and spend time looking at the ones that have 10-15 pictures and a virtual tour. Video is the new up and coming thing and will likely replace or supplement the virtual tours soon.

Signs are still a very important element of the exposure campaign for any house and a very important source of leads for the Realtor. The telephone messages that you see advertised on riders on some signs are still providing some results, albeit mixed and not nearly as effectively as the Web. Newspaper ads have declined rapidly as an effective advertising tool, but most companies still do some to keep their names in front of the public. Many agents have stopped doing them altogether or just participate in company ads. Television has also had very mixed results. The fact that your ad may end up scrolling by at 3 AM one day and 7 PM the next makes it a very hit-and-miss thing. Open houses continue to generate some traffic, but they too are down dramatically. I think people spend more time at the “virtual open house” that a good Web presentation provides than driving around randomly to see if there are any homes open. However, a well advertised open house – newspaper and on the Web – in the right location can still draw a crowd.

More changes have been predicted than have actually materialized, perhaps due to the slow pace of the adoption of technology by the vast majority of Realtors. You still don’t see a lot of Realtors out scanning the MLS with handheld wireless devices. More and more agents are taking laptops with them on listing presentations; although, the jury is still out on the effectiveness of that, unless it is combined with on-line wireless access, so that the whole presentation is more dynamic. The widely predicted ala carte method of offering and pricing real estate services has also not taken hold, yet. That requires a different business model and few companies or agents have been willing to experiment in that direction, yet.

One may conclude from all of this that at least real estate professionals don’t meet the definition of crazy, since they are trying new and different things to try to get through the current market malaise. They may be a bit conservative in their acceptance and adopting of many of the new ideas or technologies, but they aren’t fools; so, when they see someone else succeeding by trying something new, they jump on those bandwagons fairly quickly. I’m certainly an example of an old dog who has taught himself some new tricks, with three real estate Web sites, a blog and a Facebook account. I’ve got to replace my old laptop, which gave up the ghost under the strain and demands of Windows XP. I’m in our TXT group at work, but I don’ t currently IM, so maybe that’s yet another frontier that I need to explore. So many things to learn and so little time. It’s great!

The impact of pets on house hunting...

Some people will openly admit that they treat their pets like children. Many who feel that way have chosen to delay parenthood or simply not to have children. Others such as baby boomers whose children have grown up and left home, sometimes substitute their pets for the kids who have moved out. But when a pet lover turns into a home buyer, there are several things that they should be looking for, just like parents who research the best school districts when considering neighborhoods in which to shop for a home.


1) Check County & City Code Restrictions
There have been numerous stories about homeowners at odds with local government bodies over ownership of more exotic animals, such as goats, alpaca or pot-bellied pigs, not to mention large snakes or lizards. Most Michigan townships have some rules about farm animals or exotic animals and Villages and Cities may be even more restrictive about the number and types of pets allowed within city limits. Michigan Townships tend to focus upon providing the proper space and accommodations for animals like horses, cows and sheep or goats and some define the number of animals per acre of land owned in their formulas. I get inquiries about horse facilities most often in this area.

2) Read Home Owner Association Documents
Not every HOA allows pets. If the homeowner association permits pets, most likely the association bylaws will address restrictions on numbers, types, sizes, heights, noise factors and whether pets are allowed to freely roam the premises. Many HOAs strictly enforce their bylaws. Don't fall into the trap of thinking the bylaws are silly restrictions or that the HOA won't enforce its own rules. Many homeowner association covenants carry severe penalties for those who violate their HOA regulations. You could be forced to get rid of your beloved pet or move.

3) Consider the Home's Features
If you have dogs or cats think about the impact of them on the homes flooring, especially if it’s carpeted throughout. Even the most beloved pets can make mistakes and end up costing you thousands to replace ruined carpeting. And if you feel like you have to put in those cute little cat doors on several of your interior doors, plan on replacing them when you leave. Perhaps an outdoor faucet is important for bathing your dog? If so, check to make sure the home has exterior faucets.

4) Examine the Home's Layout
Aging pets might have trouble climbing stairs, so for some home buyers with senior pets, a single-story home is ideal. Cats like windows, and those with window ledges or low to the ground are preferred by felines. Is there a playroom for your pets? Is there plenty of closet space for storing pet supplies? Your cat will appreciate a private place for a litter box, and you may prefer to keep the cat box out of sight.

5) Consider the Street Traffic
Sometimes, even the most well behaved dogs bolt when the front door is opened. Cats are inquisitive, and a curious cat can find a way to push open a screen door to get outside. In an unfamiliar surrounding, pets can dart into the street. To prevent tragedy, it's better to pass on buying a home that is located on or near a busy thoroughfare. It’s better to be the last house on the cul de sac with no through traffic.

6) Ask About Previous Pets in House
If the seller is selling a home where pets live, check for pet damage, especially under rugs. Look at the backs of doors for scratches or gouges. Ask about pet accidents. Inquire about fleas in the house. Pet odors are almost impossible to eliminate from a home but might not be noticeable to you, so bring along a friend who does not own a pet to act as your official sniffer. Cats, especially, mark territory; and if you own a cat, you don't want the process of improper elimination to repeat itself.


7) Find Out if the Neighborhood is Pet Friendly
Drive around the area to see if you can spot neighbors outside walking their dogs or notice cats sleeping in sunny windows. Look for community-placed receptacles for waste deposits. Consider whether you would prefer an area where dogs are on leashes and the owners carry plastic bags, or a community where dogs run free, chasing cars and bothering other dogs?


8) Locate Pet Services
If you are buying a home in a new area, ask your agent and the neighbors for referrals to pet vendors. For example, where can you find the best:

Pet food store
Veterinary clinic
Doggie day care center
Pet sitter
Groomer

9) Search for Local Dog Park
A great way to meet your neighbors and make new friends is at the local dog park. Here are few questions to ask about the dog park: Will you be expected to keep your dog on a leash? Are dogs encouraged to play with one another and socialize? Who maintains the park? Does the park provide stations and containers for picking up after your dog? Are you restricted from going to the park during certain hours of the day? Can you hear dogs barking at the park from your new home?


10) Is the Yard Fenced? Are fences allowed?
If the yard does not have a fence, and you want to provide a safe play area for your pets, find out if fences are allowed in the sub/complex and get an estimate on how much it will cost to construct your own fence. If only “electronic fences” are allowed, consider whether or not your dog will respond to training to stay in his “fenced” yard and get an estimate for one of them, too. If the home has an existing fence, make sure it is gated, the gate latches, and the fence is high enough so your dog can't jump over it.

I've had more than one couple discover, while out house hunting, that they have major differences in their feelings about this issue, which they didn't realize existed in their relationship. When the husband or wife drops a line like "We'll just get rid of the dog," watch out, sparks may be about to fly. This is probably something that is best discussed ahead of time and not while sitting in the car with your Realtor. It is purely happenstance that this post follows yesterdays post on divorce and real estate. Had I been overtly thinking about it, I would have reversed the order.

Divorce and real estate…

I heard recently that January 7th is the number one divorce day on the annual calendar. I have no idea why (some in the audience suggested that it was New Year’s Resolutions being acted upon). I suspect that divorces are never as neat and clean and some would lead you to believe and often much messier and complicated behind the scenes than one can imagine. So far, after 42 years, my wife and I have yet to test that theory and I hope we never do. Divorces can be especially messy, if there is real estate involved in the settlement. Real property often represents a good deal of the “wealth” that must be divided between the parties in a divorce.

Occasionally there will be one ex- in the divorce with the financial wherewithal to “buy-out” the other and retain ownership of the property. That certainly makes things easier. More often than not; however, the parties will have to agree in the divorce decree to sell the homestead and divide the proceeds. That’s where the tough job begins for the Realtor involved. Most often, when I get involved in divorce-driven listings, I find that one of the two parties has moved out (most often the husband); however, more and more I’m finding situations where both parties are still living in the house, albeit in some sort of arrangement that defines personal spaces and which may require special efforts in order to show the house.

In some cases the spouse who remains in the house may not really want to sell, either out of love for the place or fear of having nowhere to go once it is sold. That can make for a very dicey situation for a Realtor. Spouses who are reluctant to sell or move can make setting up showings difficult or can sabotage showings by leaving the place dirty and cluttered. Most often they just come up with reasons why “this isn’t a good time to show it”, hoping to drive would-be buyers away by making it inconvenient. In those cases the Realtor may have no recourse other than getting the lawyers and the judge involved again to issue strict orders to all the parties involved.

The other issue that can come up is that the remaining spouse may just fall into a very slovenly lifestyle, either out of depression or just a lack of caring about keeping themselves or the house up – and that can be either the ex-husband or the ex-wife. If there are children involved, still living in the house, they may also have mood swings that cause them to start living a different, often messier lifestyle, especially if the remaining spouse has to work every day.

So, as a Realtor, you have the potential for having a property to sell and having active saboteurs to the deal as part of the seller client set. It makes life interesting for the agent involved. The agent is bound by the Realtors Code of Ethics to equally represent both parties in these situations, so all communications, all calls for showings, and all decisions about things like pricing must be approved by both parties. That is often a negotiating process for every decision, sometimes again requiring the intervention of the court. Talk about being caught in the middle!

So how do I advise handling this situation? First, you have to determine the state of affairs in the whole thing – who’s going to cooperate and who’s going to fight this sale, if anyone. Then establish the ground rules with both parties. I usually insist on a meeting with both present where I lay out how this has to work (the both parties agree thing). Then I let both sides know what needs to be done (if anything) to make the house saleable. Finally, I let them know clearly what they can expect from me in terms of the marketing effort and the process ahead; and, I let them know what I expect from them, in terms of cooperation, access and timely decision-making.

At some point, we eventually come to that embarrassing pause; after I’ve put the question to them asking if they agree to all that we’ve discussed – especially their roles in the process. If the answer is no, it’s time to say thanks, but no-thanks and leave. It’s hard enough to sell properties these days without having to work to overcome constant roadblocks and objections from the sellers. If the two parties have not cooled down enough from the divorce proceedings to act like mature adults and work with you, let more time pass. Eventually sanity will return and they’ll still need a good Realtor.

The time to act is now!!!

Out of the recent economic gloom, some good news was reported this week, Rates on 30-year mortgages dropped for a third straight week to the lowest level since the summer of 2005 as worries intensified about the current economic slowdown. Freddie Mac, the mortgage company, reported Thursday of last week that 30-year, fixed-rate mortgages averaged 5.69 percent this week.

It marked the second week that 30-year mortgages have been below 6 percent and the third straight weekly decline since rates closed out 2007 at 6.17 percent. This week’s average was the lowest since 30-year mortgages were at 5.66 percent the week of July 14, 2005.

Other types of mortgages also showed declines this week.

Rates on 15-year mortgages, a popular choice for refinancing, dropped to 5.21 percent this week, down from 5.43 percent last week.

Rates on five-year adjustable-rate mortgages declined to 5.40 percent, compared to 5.63 percent last week while rates on one-year ARMs fell to 5.26 percent, down from 5.37 percent last week.

It marked the first time that the 15-year rate has fallen below one-year adjustable-rate mortgages in seven years.

The mortgage rates do not include add-on fees known as points. Thirty-year mortgages carried a nationwide average fee of 0.5 point while 15-year mortgages had a fee of 0.4 point. The five-year and one-year ARMS both had fees of 0.6 point.

A year ago, 30-year mortgages stood at 6.23 percent while rates on 15-year mortgages were at 5.98 percent. Five-year adjustable-rate mortgages averaged 6.04 percent and one-year ARMs were at 5.51 percent this time a year ago.

All of this, combined with the Fed rate cut this week should help the battered real estate market by making it much cheaper to buy a new home. For those who have been sitting on the sidelines, in apartments or in rental houses, now is the time to act. There are great houses on the market at unbelievably low prices AND now you can get a great mortgage rate. You risk missing the market, if you wait too long, trying to time the market to buy the perfect house at the lowest rate. One or the other will be gone by the time you move. It’s time to stop dreaming and start acting on that new home. See me today and let’s get started!

Is it time for a career change?

“Enjoy when you can. Endure when you must.” (Johann Wolfgang von Goethe). Those words from the blog Jack’s winning words, which I get a feed from every morning, certainly apply well to the real estate profession.

I do enjoy meeting and working with the people that I meet and the feeling of success of finding the right new home for clients; and, certainly going to closings is normally a joy (although some as just to be endured). I enjoy going through the nicer homes that people have kept up and are proud to show off. I also enjoy much of the Internet work that I do to market the houses and the virtual tours that I create. I enjoy maintaining my three real estate Web sites and making sure that the other sites that I use are updated. I enjoy writing my monthly newsletter and posting this daily blog.

What I must just endure are the long open house afternoons in empty houses, especially when no one comes to visit. And, the seemingly endless parade of cold, empty and run-down foreclosure houses that everyone wants to see these days. A day full of that can be fairly dismal. Of course there is the market itself, which has changed the behaviors of both buyers and sellers. And the home sellers who refuse to price to the market and yet can’t understand why their house isn’t selling. Those all kind of come with the territory, along with the seven-day work weeks.

On balance, though, there is more to enjoy than to endure and that’s why I stick at it. Like life in general and a good marriage, it takes work to make it worthwhile and enjoyable. So I get through the things that may not be as enjoyable and look forward to the things that are, and the rewards that go with them, both the money part and the on-going sense of accomplishment and satisfaction.

Now, you can be a part of this satisfying profession. Our company has a goal of hiring 300 more sales agents this year and has programs to provide license training to get you started. If you are in the 5-county Southeastern Michigan area, there is a good chance that there is a Real Estate One office near you. Email me for more on this program and become a part of our team. You'll be glad you did.

The FUD Market…

Way back when I sold computers (seems like a previous life now), we had a term for the stuff that one competitor in particular would do to “freeze the market” until they could get out a product to compete with something that might have been newer and better than their current offering. It was called FUD – Fear, Uncertainly and Doubt. In those days it meant that the big competitor would send its sales minions out to spread FUD in the market by whispering in the right ears innuendos about the competitor that would cause potential buyers to pause, because of their fears, uncertainties or doubts about the new and better product or about the company that brought it to market.

In the real estate market these days, I’m seeing a market frozen by FUD, but these fears, uncertainties and doubts have mostly to do with jobs and the future. The spread of this FUD is also certainly not by a whisper campaign – the news media is screaming from the rooftops about the loss of jobs locally and the impending national recession. A case could easily be made (and has been by some politicians looking for Michigan primary votes) that Michigan has already been in a one-state recession for the last 2 years.

I suspect that labeling this a FUD Market makes more sense than labeling it a Buyers Market. We moved well past the simple mechanics of a Buyers Market over a year ago. Not only are there more houses on the market than there are buyers out looking (a key part of the definition for a Buyer’s Market), but there are also far fewer buyers out looking to buy anything. FUD is keeping the buyers out of the market.

We’re still seeing reasonable, albeit slower, activity at the lower end of the market, especially by bargain hunters. What we’re not seeing in this market are the buyers who might have been out there looking 2-3 years ago because they just got a big promotion at work and want a bigger house. We’re not seeing the union workers who put in lots of overtime and have money to spend on a “move-up house.” Recently the majority of “buyers” are looking for foreclosure houses that they hope to steal, so maybe we should call it a “Thieves Market.”

Now we’re seeing the stock market take a nose-dive, and hearing talk of a Bear market there, much as we had in 2000-2001. All of this just adds to the FUD in the housing market. So, what will it take to get past the FUD and get back to a more normal market? Time, obviously; but, I think the moves that are afoot in Washington to get bills passed and signed to modernize the FHA, to help struggling foreclosure victims and to stimulate the economy a bit, will all help at a national level.

Locally, we’ve got to get through the next round of layoffs, buyouts and plant closings in the automotive industry before we can start to turn things around. It will likely be mid to late-summer before we are even at bottom in Michigan. There's also hope coming out of the recovery that Ann Arbor is experiencing, following the departure of Pfizer, much of it driven by entrepreneurial start-ups. We'll need a big dose of that in the Detroit area, once the dust settles fromthe automotive shake-ups.

For sellers inthe real estate market, this all means the 3-P’s of real estate (Patience, Perseverance and Price) are more important than ever. For buyers it means that now is the best time to get out and find good deals on properties before the turn around sends prices and mortgage rates back up.

Searching for that rare gem...

This man is searching for the perfect foreclosed home - one in move-in condition that needs no work and which is priced ridiculously under its true value. Why is he shown in a garbage dump? because that's sort of what you have to go through to find that ideal foreclosed home. You must be willing to pick through tons of garbage, visit scores of cold, thrashed or vandalized houses, and endure the smell of sewer gases backing up in abandon homes.

I get an awful lot of requests from would be buyers these days to help them find that ideal foreclosed home. I know that they exist, because last year I found one with a young couple who were looking for an investment property. The house that we found needed almost nothing but some cleaning and a little paint. And, earlier this year I got to one of the boomerang houses that I wrote about on Friday just a little too late, with my clients. The house had been totally redone, but the owner (and would be house-flipper) apparently had run out of money and it had gone back into a second foreclosure.

So, do those gems in the rough exist, or are they just urban legends? I can attest that they are out there, but I can also tell you that you'll be spending quite a bit of time like the guy above, rummaging through some real garbage, before you find what you're looking for. Just dress warmly and take a flashlight, if you are going out on a foreclosed house hunt, since most of them are winterized and many have no heat or power for lights.

The other thing that you need to do is to get yourself pre-qualified and be ready to act quickly and decisively, if you find the right house. The good ones just don't last long on the market, once they are priced right and the banks won't even look at your offer, if proof of funds or a letter of pre-approval isn't with it. If you find a really nice house at a great price, you should also be ready to make a full-price offer (or near full price), if you really want the house. It's not unusual for the really good foreclosed homes to have multiple offers going to the banks at the same time. there are those out in the market who just run around making "low-ball" offers on every house, to see if they can steal one or two from banks tired of dealing with them. So, if it's a good house, which last sold for $250,000, and the bank is offering it at $150,000, you risk losing it to a more serious buyer it you come in at $120,000. Offer at the 95% or better level for nice, clean, move-in ready foreclosed homes. Likely, the bank is already taking a beating on the place and isn't going to look kindly at you trying to take further advantage. If nothing else, listen to your Realtor's pricing advice.

Boomerang Houses

Yesterday, I talked about the boomerang kids phenomenon - where adult children return home to live with mom & dad. That was scary enough; but, today let's look at a new trend that just starting to show up in the market - the boomerang house.

I'm actually coining that term today to describe houses that were foreclosures and which were sold to people (many of them young, first-time buyers) who have now, themselves lost them to foreclosure. So, the house has boomeranged back on the market and back a second time as a foreclosure. What's that all about?

I've reported here more than once on foreclosure homes and the care that is needed to buy one. They are just such darn tempting things - the gold rings of the current real estate merry-go-round. There sits that house that sold once for $350,000 and now you can "steal" it for $175,000 (or less). What a bargain! So you jump at it. And then the fun begins.

If you've followed my advice or just shown common sense, you had a good inspection done. What should have resulted was a list of things that need attention, some more immediate and costly that others. Certainly the list will go beyond just a coat of new paint here and there. Most of these foreclosure houses need maintenance, many need major repairs, and almost all need some updating. After all, the last owner fell on hard times and lost the house. You don't think he/she was maintaining it at the end do you?

The list of major issues can be quite long and quite expense, especially if the previous owner was the type to strip or damage the house on the way out, which many have. Also the house was left empty for a period (sometimes for a year or more), so vandals might have also wrecked havoc on it. You'd be lucky if none of that happened to the house that you want to buy. Still, it has been sitting there empty and maybe totally winterized for a while, so don't be surprised by the amount or work and money that may be involved to bring it back to a livable state.

And that, dear readers, is the rub. I've seen people dump $20-50-100K into these "bargains" and still not have it livable. What happens is, they run out of money themselves and end up losing the house again. If they're lucky, that's all they lose. I've seen cases where amateur "investors" had hocked their own house to buy a property that they hoped to "flip" and end up losing both houses - truly a sad turn of events.

So some (not many yet, but this is just the start of this trend) of these great foreclosure houses are turning up again as "boomerang houses". This time they actually may be a better deal, since the last buyer may have dumped a ton of money into them before going broke. It's sad, almost as if the houses themselves were collecting a wall of "trophies" of the heads of previous owners. Don't let yourself be added to that trophy wall - look twice before you leap and get a good Realtor to help you with the search and the decision.

Boomerang Kids

They're back. The "Boomerang Kids" — young adults who left to go to college, get married or just strut their independence — are moving back in with mom and dad at a higher rate than in decades. Boomerang Kids can be a mixed blessing for parents, both emotionally and financially.

According to studies, the trend is cyclical. Especially during tough economic times, adult children head for home. Census figures show that 56 percent of men and 43 percent of women ages 18 to 24 today live with one or both parents. Some never left, while an estimated 65 percent of recent college graduates have moved back in with their parents.

The reasons are many, the first being economics. Not only are quite a number of recent college grads still unemployed, many are underemployed, making quite a bit less than they need to pay off college debts and maintain any kind of independent lifestyle. That sent a lot of young folks back home. For as many as 40 percent of recent grads, it made smart economic sense to move back in with their parents – where life is comfortable and rent is either low or nonexistent – while they get their finances in order.

Then, of course, some return for personal reasons (especially the older boomerangers), to recover from a divorce or an illness or a layoff, or just because they cannot afford their parents' lifestyle living on their own. Some come back with their own children – your grandchildren - in tow. That can be especially stressful, if the parents had settled into a comfortable “empty-nester” lifestyle. It’s one thing to be a grandparent and have the grand kids visit, even for a weekend stay; it’s a whole other thing to have them come live with you.

How To Make It Work

Most researchers agree that parents can take steps to create a win–win situation. The first step is to realize that you are now dealing with young adults, not children, and that means that you can work out some logical arrangements with them and not try to treat them the same as you did when they were in high school.

1.Set house rules. Put them in writing. Make it a contract. Remember, it's still your house. While these "tenants" are your children, they still need to understand and agree to your rules for living there.

2. Set a departure date, whether it be three weeks or three months. It may be hard to enforce this suggestion, but you need goals that everyone agrees to at the start. This might be toughest when dealing with a divorced child with children of his/her own in tow.

3. Insist on responsibilities, which may include paying rent and/or payment in kind, such as taking on household chores – doing laundry, making dinner two nights a week, buying groceries. This can often be negotiated. One method is to ask the returning child what he or she believes would be reasonable rent. (This is also the area, when not clearly laid out, that can result in the most misunderstandings, as adult children return to old habits of expecting to be taken care of.) And don’t let your children automatically assume that you’ll provide free child care while they’re out working or looking for work, if they come back with children of their own.

4. Help them restructure debts, rather than simply bail them out. Then teach them how to avoid new debt. One option is to match debt–reduction payments, with the understanding that they put away credit cards and live within their means.

5. Do not sacrifice your own financial future. Decide how much you want and can afford to help. Children tend to think their parents are wealthy, while some parents provide more financial support than they can afford. Remember that your children have decades to build their financial security, while you may be only a few years away from your retirement date. Ironically, if you are not careful, you could end up depending on your children for help in your old age.

Having your darlings return to the safety net of their home – can be wonderful time of family closeness. Setting the tone, laying out the ground rules, and making smart–money financial decisions can help create a positive, supportive environment that is in the best interests of you and your returning family members. It can also be a time of terrible stress, driving otherwise loving families apart. Like everything else in life that is worthwhile, you have to work at making this arrangement work for you and for your child.

In some cases that may also mean changes in your home, either modifications to the old homestead or looking for an entirely new home. Once multiple adults start living in a home the old 1 ½ bath house may not seem as accommodating as it once did, and the lack of “personal space” in the old 1400 Sq Ft ranch will start to show up. Only having one TV viewing room may become a big issue with 2-3 adults viewing preferences to try to satisfy. I can help you find a new place where all of you can be comfortable. Maybe we can even find a duplex, where you can get a temporary solution to your boomerang housing needs and end up with a future income source for your retirement. Give me a call.

Culture groups update...

I received an update from the Iconocast group – they’re the ones who have lumped us all into neat little age-related groups with labels – Boomers/Matures, Gen-Xers and Millennials – and then purport to track trends in those groupings. I got a particular kick out of the Boomers/Matures group (I’d be in the Matures subgroup there), since they reported a rise in the number of these aging Yuppies who are now ending up in the emergency wards of the country due to motorcycle accidents. Their take on it -

Easy Riders they're not. Boomers taking hard falls from motorcycles are hitting ERs in higher numbers nationwide. Between 1997 and 2006, the accident rate for riders 45 and over jumped from 14% to 24% (San Diego Union-Tribune 12.9.07).

One reason for the spike is that more older bikers are on the road; their median age rose from 27 in 1985 to 41 in 2003. Meanwhile, the motorcycles they ride have gotten bigger and more powerful, compounding the risk of accident and injury for bikers with slower reflexes.

“Everybody in trauma centers is seeing this more,” says Dr. Frank Kennedy, trauma director at Sharp Memorial Hospital in Kearny Mesa, California. “The baby boomers feel like their life is getting boring, and maybe they want to be more adventurous.”

The kids are grown, there's cash on hand and the open road beckons. Why not spring for that monster dream bike? The lure is understandable, but Boomers may want to opt for a kinder, gentler bike that's more in synch with their aging bodies.

Actually they have already invented that “kinder, gentler bike” for Matures – it’s the three-wheelers that you see cruising the retirement villages of Florida or maybe the golf carts that also provide lots of the transportation in those same locations. I do get a lot of requests for garages big enough to store the “bikes,” and the bikes that are in question don’t have anything to do with peddling. Maybe instead of a Scion xB I should have gotten a Harley. No, I’ve gotten by this long without breaking any bones and I don’t want to start now.

According to Iconocast, the Gen-X group has created a whole new take on the traditional Tupperware party – the Taser party –

They come in pink, blue, silver and black, but we're not talking Tupperware. Taser C2s are in hot demand at home-shopping parties in Arizona, where instead of trading recipes, suburban housewives take aim at cardboard cutouts.

“We have Tupperware parties and candle parties to protect our food and house, so why not have a Taser party to learn how to protect our lives and bodies?” asks Dana Shafman, who founded Shieldher Inc. to franchise the concept (Arizona Republic 11.29.07).
The gals don't drink-and-Taser (no alcohol is permitted) and they don't practice on each other. But they do learn how to handle the devices, which can hit attackers up to 15 ft. away with electrical volts that incapacitate them.
Hosts of Shieldher Taser parties, rolling out nationwide in 2008, get a free Taser for every 10 they sell in their homes.

Consumers are more concerned than ever about personal safety. Tasers empower women to protect themselves and their families without bringing firearms into the home.

Home-shopping parties keep expanding into new domains, from pet products to sex toys. Why not use them to sell Tasers?

Many Realtors already carry pepper spray as a defense against attacks; maybe Tasers are the next big things for Realtors. I can see it now – “Reduce your price or I’m going to hit you with another shot.” There’s probably something in our Realtor’s Code of Ethics that discourages that behavior.

The poor Millennials are left with a pretty tame trend, at least according to this report from Iconocast. Apparently they're really into the reality show showdowns in fashion and cooking and other areas –

Designers gone wild? That’s the idea behind Style Wars, a live-action fashion smackdown that pits frenetic fashionistas against one another in front of a live nightclub audience.

The national competition challenges contestants to whip up “instant couture” from vintage duds, funky fabrics and unlikely materials — think newspapers and spray paint — in just a few quick snips (and five short minutes).

Impromptu creations are judged on qualities like innovation and creative vision. Early elimination rounds tour the country before the Fashion Week finale in New York City.

As seen on shows like Project Runway and Iron Chef, creativity-in-motion can be a compelling, compulsive concept. Live, manic mashups that mix popular elements of media and culture are entertaining departures from static, familiar formulas.

How dull, compared to crashing your motorcycle or Tasering someone. Of course the Millennials will already have on the “Please Don’t Taser Me” T-shirts that were invented and became popular right after last year's Florida University campus Taser incident that was splashed all over You Tube. I suppose the Millennials might like some of the house makeover shows or the home redecorating shows. Maybe if they filmed the whole show using a cell phone video camera it would appeal more to them even more.

What does all of this have to do with the real estate market in Milford, Michigan? I haven’t got a clue; but it was fun to discuss. See you tomorrow.

Foreclosures can be costly mistakes, even when you don’t buy…

With the explosion of foreclosure homes there has been a concomitant increase in the number of deals that end up going south. Lots of people are out making offers on the great deals that they think they see in the foreclosure market; however, a fairly high percentage of those deals never go to close and some of those failed deals can be quite expensive for the would-be buyer.

First-off, these houses are usually empty and have been winterized by the asset management firms that control them on behalf of the banks. That means there is often no power, no heat, no gas, and no water – nothing. The banks have the houses winterized because they don’t want to be charged for he costs of keeping them heated in the winter. If you go into one of these homes, there should be very prominent signs advising you that the house is winterized. That’s a good thing, at least from one point of view. A house that has no power or gas, and thus no heat, and is NOT winterized in Michigan at this time of the year is likely to have (or will have) pipe damage due to freezing of the plumbing. That’s a bad thing and can be very expensive to repair. So look for the winterized signs or for heat to be on in the house (even if it’s just set to 45-50 degrees).

The cost that I talked about above comes into play when you go to inspect one of these winterized houses. Winterization involves more than just shutting off the water. If done properly the company that winterized the house drained the water heater and blew out the pipes, using a compressor – much like they do when your sprinkler system is winterized. That involves time and equipment and has a cost involved. So when you come along with your offer and want to do your inspection, expect the property management company to charge you for the de-winterization and re-winterization of the house or they will insist that you have a professional do it and provide them with proof in the form of a paid receipt. It’s not free, no matter who does it, and normally adds about $200 to the inspection fee. and don't expect them to buy the arguement that you're going to buy the house, so why should you have to pay to re-winterize it. Too many deals fall apart later in the process for them to take that risk. You will have to do it, no matter what.

So, with a normal inspection cost of about $300-400 you can add the de-/re-winterization cost and all-of-a-sudden, you’ve got $500-600 into a home that you might not even want to buy, once the inspection results are in. I’ve had lots of grumbling buyers walk away from foreclosure properties that had major issues that they didn’t see until the inspection. That amount of money is not a trivial amount to just lose for most buyers. But, for some, the inspection is just the first opportunity to lose on the deal and still not end up with a house.

I had some young, first-time buyers who when through the $500 inspection phase and asked the bank to address two major issues that the inspection uncovered. The bank refused, as most do these days, citing the fact that the price was already low because the house was being sold “As Is.” In this case the buyers signed off on going ahead with the purchase, even though doing so made the earnest money deposit non-refundable (which they were made very aware of at the time). That is a fairly standard clause in the bank documents that you have to sign in order to buy a foreclosed home. This same clause removes as a reason for backing out any issues with financing of the home; so, you can’t come back later and claim that you can’t get a loan. If you are going for an FHA loan there may be lots of issues that need to be dealt with in order to qualify and the banks jujst aren't in a mood to do any of the repairs - so consider that, too. In the example that I'm using, two weeks later the young couple changed their minds, after considering all of the work that would be required to make the house really livable. By that time, it was too late. They lost their $1,000 earnest money deposit, too. That was quite an expensive lesson ($1,600) learned for them.

So, even if you don’t end up owning a money pit house, just the process of trying to buy one can be expensive. As a Realtor, I feel and obligation to warn and advise my clients about the risks involved, but I cannot make the decisions for them. I felt terrible about the young couple who lost their earnest money, but I had been very clear with them about the consequences of signing-off on the “As Is” acceptance of the inspection results. The inspection is your only real out on these foreclosure homes, so use it wisely.

There are some great deals out there and many foreclosed homes have little wrong with them; but, many are wrecks that someone has abused and should be avoided. You can tell if you’re in a real monster, because they’ve been stripped or vandalized or just deteriorated noticeably. Sometimes you just can’t tell until you do the inspection. And please, don’t let the $500-600 that you spend for the inspection become a ball and chain that drags you down into a pit. If the results are bad, get out immediately and feel fortunate to have escaped. If you don’t have $500-600 that you can afford to lose, then stop looking at foreclosed houses! They are a gamble and like any gamble you have to know your limits.

Just say no to a part-time effort…

It’s bad enough that 30-40% of the agents that you’ll meet in this business are only part-timers, now more and more of the small franchise operations in the area are becoming part-time companies – open for business only 5-6 days a week. Real estate is a seven-days-a-week business and the majority of the potential buyers only have weekends in which to look for a new house. It’s also an impulse-driven business, with many on-the-fly requests for showings.

So, as you re trying to choose a Realtor to list your house, ask your potential listing agent if his/her company is open seven days a week, with a real, live person on duty who can set up appointments to show your house. If the answer starts out “No, BUT,” run, don’t walk in the opposite direction. There are no "BUT’s" that really make sense or which will really do the job.

Many of the little, under capitalized franchise offices can no longer afford staff to answer the phones, especially on the weekends. Almost none of the little 1-2-man operations that are picking up lots of the foreclosure business these days have weekend hours. Call one of them to set up a showing on a Sunday and you’re likely to run into some telephone answering message that drones on about whether or not you know your party’s extension. The same thing happens when other agents from other companies try to set up appointments with them, too. Whose listings do you think get shown? Not theirs. Not yours, if that’s who you have representing you.

The same is true if your Realtor tells you that he/she has a day job (most times they won’t tell you that unless you specifically ask, and sometimes not even then). Having a part-time Realtor might not be as critical as finding out that the surgeon you’re scheduled to be operated on is only a part-timer, with a real job as a sales clerk at Macy’s or as a hair dresser at the Golden Locks Salon; but it does mean that he/she can’t possible react to the “I’m sitting in front of your listing and wondered if I could see it now?” calls that are so much a part of this business. You just aren’t getting what you deserve with a part-timer.

It’s a tough time in the real estate business and I don’t recall that famous saying (to paraphrase it a bit) going – “When the times get tough, the tough close up for the day.” As a consumer or a seller you deserve a full-service effort from your Realtor and the company that he/she works for. Ask the tough questions and don’t put up with the BUTs for an answer. It’s noon on Sunday afternoon, do you know where your Realtor is? Is he/she working for you? Is their company open and setting appointments for your home? Or, can you only leave them a voice message, if you know your party’s extension? Just say NO to a part-time effort.

Be a buyer and not just a shopper...

I get called a lot by people who want to go look at houses, but who aren’t ready to buy. By that, I don’t mean that they aren’t mentally ready to make a move (although that may still be an issue for many); but, rather that they haven’t prepared to enter into a purchase agreement for a new house, even if we find the perfect house on the first trip out. They are shoppers, not buyers.

For the sake of the rest of this post, I'm going to assume that the potential buyer is unencumbered by a current house - they don't have to sell their house before they can buy. If you have a house already then the first thing to do is to figure out what you're going to do with it. Some, but very few, buyers that I get tell me that they can afford to buy a second house without having to sell their current home. That's good, because most sellers today are not in a mood to listen to contingent offers. They know how long it might take you to sell your current home. So let's assume that you've already sold or that you're coming out of an apartment or lease and don't need to sell anything.

There are several things that the potential home buyer needs to do to prepare to become a serious home buyer. The most obvious step is to try to get a handle upon what you can afford to spend on a new house. Getting a good, accurate estimate about what you can afford may involve more than just sitting with a mortgage broker to understand your current credit score and borrowing ability. If you have a financial advisor, you should likely start with them to understand how a new house payment will fit into your overall budget and financial plans.

After meeting with your financial advisor, get with the mortgage broker and use the figure that you have worked out with your financial advisor as your total monthly payment budget. The mortgage person will figure out what you can afford for that number, including taxes and insurance. Ask the mortgage person to give you a pre-approval letter based upon those discussions. They may also suggest locking in a mortgage rate for some short period of time – usually a month or less.

Next, get with a real estate professional – a REALTOR® – and take some time up front to discuss in detail what you would like to have in a new house. Make a list of locations and features and other things that are important to you. If the school district’s MEAP scores are of concern to you, let your Realtor know that, so that he/she can research that for you. If drive time to work is critical in your decision let your Realtor know that, too, and perhaps try out the routes from the area that you are interested in to your work to see what you hit in the mornings or afternoons. If close, convenient shopping is important, tell the Realtor that, too. The more that you can share with your Realtor up-front, the more helpful he/she can be in your search. Just saying, “I’ll know it when I see it,” doesn’t give the Realtor much to work with and will likely result in a long and potentially frustrating process.

There are lots of checklists available that you can use as you go out looking. I have one in the FAQ section on my Web site www.MIHomeBuyer.com, along with tons of helpful information for both the first time buyer and the experienced buyer. Even if you’ve bought houses in the past, it’s worth a quick read through the FAQ section on that site to refresh yourself on the process and any changes that might have occurred since you last bought.

There is also a form there that looks at the house much as a home inspector might, so it gives you a different perspective on what to look for. In real estate people tend to make their offers based upon the heart (they fall in love with the house), but they end up buying based upon logic ("what’s this really going to cost me, if I find major issues during the inspection?"). You can get both working on the front end with the proper preparation.

Another thing to think about at is the actual move itself. What will you do if your offer is accepted and now you have to move in 30-45 days? If there are children involved, what about their school situation? If you are currently leasing or renting, can you get out of that obligation in time? If you have lots of stuff in your current home, how will you get that moved? Will you have time to do some work in the new house before you move in, or do you have to move in immediately? You should have at least thought about questions like those before you make an offer on a new place. If you need extra time, you might be able to negotiate a delayed closing up front. Trying to get the seller to renegotiate the closing date after it is set (and after the sellers have made their plans to move) is difficult.

Home shopping doesn’t have to be all that difficult or intimidating, but it does take a little more thought ahead of time than just going to the mall for some window shopping. Buying a home is certainly not an impulse buy that you can just whip out your credit card for on the spot. Fortunately, there are professionals available every step of the way to provide help, information and (if you’ll allow us) guidance through the process. So, if you've decided that you want to take advantage of the best buyer market in decades, get yourself prepared to be a buyer and not just a shopper.

Cleveland sues banks over foreclosure mess…

“I’m gonna make them an offer that they can’t refuse.” That’s what the mayor of Cleveland said happened to his city. Likening the actions of the 21 major banks that the City of Cleveland just sued, mayor Frank Jackson said that the banks were acting just like organized crime syndicates to rape and pillage his city.

As reported on CNN Radio, the suit, filed in Cuyahoga County Common Pleas Court, alleges that in pushing sub-prime mortgages in Cleveland, the companies created a public nuisance in violation of state law.

City officials hope to recover hundreds of millions of dollars in damages for lost property tax revenue, the cost of demolishing homes left abandoned and the cost of policing neighborhoods devastated by thousands of foreclosures.

Jackson said, "If you look at the end result of organized crime activity on neighborhoods, cities and individual lives, sucking equity out, you see the same thing here."

The banks and mortgage companies being sued reads like a 'Who's Who' list on Wall Street. "They are the ones that fueled this operation and that's what placed us in this predicament," said Cleveland's Director of Law Robert Triozzi. "They are going to be held accountable. Mayor Jackson said the lenders signed off on deals that they knew should have never been made."

The companies being sued are Deutsche Bank Trust, Ameriquest Mortgage, Bank of America, Bear Stearns, Citigroup, Countrywide Financial, Credit Suisse (USA), Fremont General, GMAC-RFC, Goldman Sachs, Greenwich Capital Markets, HSBC Holdings, Indymac Bancorp, J.P. Morgan Chase, Lehman Brothers, Merrill Lynch, Morgan Stanley, Novastar Financial, Option One Mortgage, Washington Mutual and Wells Fargo.

Certainly, the same statements could be made here in Detroit and in many cities and communities around the country. Defenders of capitalism will protest that this is how the system works and argue that the lenders are the victims here and not the foreclosed homeowners. They will point to greed on the part of the borrowers and downplay the greed that drove the banks to pursue these questionable lending practices. My last rant about greed in the system brought out vigorous defenders of greed as an underlying engine of capitalism, so I won’t go there this time. That is the extreme view on the opposite side of this argument by Cleveland that the banks acted in the same manner as organized crime to bilk unsuspecting homeowners.

The truth, as usual, lies somewhere in the middle and is obscured somewhat by the human nature that was involved on both sides. I have no doubts that many homeowners knowingly took on more credit than they could afford, hoping that the ride upward on home values would continue forever; or that they could at least get out before it ended. I also believe that many loan officers (with or without any official blessing from the banks involved) took full advantage of every gullible borrower they could find during the run-up to this failure, because they were being paid to make loans, not to give credit counseling to potential borrowers. So, who’s to blame – nobody, everybody or just whomever you can drag into court with deep pockets?

The mayor of Cleveland will get his 5 minutes of fame over the lawsuit and, likely, will never be heard from again, unless he’s planning to run for governor next year, at which time he will point back to how he tried to “stick up for the tax-payers of Cleveland.” Lots of lawyers will earn outrageous fees to defend against this frivolous lawsuit and will laugh all the way to the bank. The banks will end up paying nothing but legal fees and the poor foreclosed and now homeless people will get nothing but some small, temporary sense of satisfaction that someone at least tried to stick it to their protagonists. It’s all quite pathetic, when you think about how little really can be accomplished by these actions.

The good that could come out of this sad state of affairs will not be the result of lawsuits or even of new laws being passed in Washington. If any good comes from it, it will be the collective learning that the rest of the people in America should take from this lesson when listening to those “too good to be true” offers that have now come back to bite the unfortunate homeowners who have been foreclosed. Unfortunately there is a famous saying in American history that haunts us in this case as in some many cases of pain in our history – “those who cannot remember the past are condemned to repeat it” - George Santayana. We seem, as a society to be forever condemned to repeat the mistakes of waging wars over vague issues and trusting loan officers with offers that sound to good to be true. Didn't we go through something similar in the Savings and Loan meltdown a few years back? Let us resolve not forget the pain of the current sub-prime debacle for a long time to come.

Look at 3 + 3 in a house…

I heard a good explanation from a home inspector recently about the three things that are important to look for in a house and I believe that he would have gone on to explain the three important systems to look at, too, had he thought about it a bit more.

The three things that he was advising my client to look at were the foundation, the structure above the foundation and the roof. I certainly have no argument with the importance of those three elements, which pretty much comprise the physical structure of the house.

His advice started by telling them to look at the foundation for cracks that would indicate potential major issues. Vertical cracks in poured concrete walls he advised aren’t a cause for major alarm and can be easily fixed with modern epoxy injection techniques. It's the presence of horizontal cracks or those that go down a poured wall at an angle that are cause for alarm, because they indicate forces at work that are trying to shear the wall and which could cause eventual failure and collapse.

The next major are to look at is the wood structure above the foundation and there he advised you would be looking again for signs of forces at work – cracks over doors, doors that don’t fit, cracks at corners and other signs that forces other than normal settling might be at work, many times in conjunction with foundational issues. Other things to look for included mold and interior wall water damage, such as bowed walls. There is also the possibility of infestation from termites, carpenter ants and powder-post beetles, all of which occur in this area.

Finally there is the roof, the umbrella for the house, so to speak. Things to look for there include any leaks and the condition of the shingles as well as the provision for air flow to the inside of the roof. Poor airflow will often result in mold on the interior of the roof decking and/or early failure of the roofing shingles, due to excess heat build up I the summer. Common mistakes include not enough ridge vent area or not enough can vents and blocked eaves vents - this is sometimes caused by homeowners being overzealous when adding extra insulation and running it all the way out to the edges, thus covering over the soffet vents air flow. This inspector said that he has seen many cases of improperly installed ridge vents where there were actually no holes pierced in the decking materials to allow any air flow to the ridge vents. Another common mistake is covering over gable vents when new vinyl siding is installed. when looking at the inside of the attic look to see how much insulation is there. Many of the older homes were built when the code called for 12" of insulation for this area. Now the code specifies 24" and you should plan for additional insulation, if you find too little.

To these elements of the house’s structure, I’d also add that there are three key systems in the house that can either be in good shape or cause major problems – the plumbing, HVAC and electrical systems. Homes with old or poor systems in any of those three key areas can become major money pits.

Looking at the plumbing one should look closely at how water gets into and out of the house – the age and makeup of the plumbing system. Look for copper instead of lead-based pipes on the feed side and PVC instead of cast iron on the waste side. Look also at the water heater, which is likely the shortest life span item in the system (other than maybe fixtures). If one doesn't exist, you should also put on your "to-do" list to put a good, easy to access, clean-out into the waste side of the system.

The HVAC system is one of the more costly systems in the house and also one with a finite lifespan. If the HVAC system is more than 10 years old it is likely getting ready for replacement. If the unit has central air, make sure you look at the condition of the condenser outside. Often these are ignored for maintenance or owners allow shrubs and bushes to overgrow them. If the old unit didn’t have central air, replacement time is the time to add that to the house. Also look at adding modern air cleaning and humidifying systems at that time, too. And don't overlook the duct work, which may need a good cleaning to prevent dust and mold allergens from being circulated by the system.

Finally there is the electrical system, which many people overlook. An old fuse-based electrical system is both a pain in the butt to live with and potential dangerous. Get it replace with a modern circuit breaker box and take that opportunity to get the service to the house upgraded. Lots of older homes had less than 100 Amp service to the home. Get at least 150 Amp, if not 200 amp service run to the house. Things have changed since the 50-60-70’s and there is lots more household items that put electrical demands on the system in the modern home. Also look for GFCI circuits in the kitchens and baths and install them if they are not there now.

So when you have the home inspected, look at all of these areas. If you’ve stumbled upon a really good house – one that has had one or more really good owners in the past – you’ll find that most of these areas are up to date. Unfortunately these are areas that are all to often “out of sight and out of mind” and so become quite dated and even dangerous.

These six major areas are the really big money areas that should be of concern in any house that you look at. These areas cannot be helped with a new coat of paint or any other of the simple things that you might do to improve the appearance of the house. These are the real monsters in the closet that come back to bite you big-time. Pay attention to them in the front end, before you make the buy decision.