5 Cautions for buyers about short sales

Portions of this post taken from an article written by Amy Hoak, a MarketWatch reporter based in Chicago for the Wall Street Journal. In a short sale, a homeowner's lender agrees to accept less than is owed on the mortgage for the property. It's a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.

A short sale can also be attractive to a home buyer since the lender will often accept bids on the property that can be 10% or more below the market value, determined by the prices of comparable, nearby properties. Although the mortgage balance is probably greater than the price a seller could expect in a traditional sale, the lender may be willing to take less than it's owed in a short sale if it can avoid the further expenses of foreclosing and taking over the property. The savings, however, often come at the expense of a home buyer's time. Of the short sales that I’ve done, in only one case did we get an answer from the bank in less than a month. In a couple of offers the buyer “timed out” and gave up after three months of waiting. It can be frustrating.

Are the savings worth it to you? Consider these five caveats before shopping for a short sale:
1. You'll wait in the dark
Perhaps just as frustrating as the wait time is the fact that you likely won't be privy to details as the deal is progressing. That could mean going months without an update. Initially it was because banks were overwhelmed and understaffed. But as they have ramped up staffs the reasons for the delays have shifted, The lender could be considering multiple offers. If the seller had both a first and second mortgage, that could also make the process more complicated, since negotiations may have to take place with both. The homeowner also has to prove their financial hardship to the lender. Some agents working for homeowners do better jobs than others of getting the right documentation together to send to the bank to justify the short sale. In the end, the approval process may also involve multiple layers of bank management, each with its own committees and reviews that take time. Of course the buyers see none of the hassles that are going on between the bank and the homeowner or behind the scenes at the bank they just see unending delays and get no explanations.

2. Banks will make you a deal, but within reason
There are deals to be found in short sales -- but don't expect outright steals. A buyer needs to make a fair offer, based on comparable homes that have been sold recently. The offer should be aggressive, but not ridiculous. The biggest mistake that I see with both short sales and foreclosure sales is the tendency of buyer to low-ball the bank, thinking that they just want to dump the property. It’s just not going to happen. In fact, if the bank has already factored in its loss to the price the winner will be the bidder who goes slightly above the asking price. My advice is to listen to your Realtor’s advice on price.

3. Sales are 'as is'
In a short sale, it isn't likely that you will get allowances from the seller for repairs that are needed, as you might in a traditional sale. You absolutely must do a thorough home inspection and know what you're getting into, but remember that your bid is for the property "as is." You need to factor into your offer the cost of the needed repairs. Neither the seller nor the bank is going to pay for repairs. Fortunately we are out of the really bad winter season when doing a good inspection was almost impossible.

4. Have a back-up plan
Even if you decide to bid on a short-sale property, it might be best to keep looking anyway. It isn't uncommon for people to find a home they like better and cancel the short-sale deal. You can do that if the bank has not already accepted your offer. Just make sure that you get an acknowledgement of the offer cancellation in writing from the other agent. That said, when a offer is accepted and earnest money is put down, remember that you risk losing those funds if you decide to walk away and buy another home. You have few outs once the offer is accepted. It may take months before the deal closes, even after the offer is accepted. One consequence of the long wait times is that it is hard to lock-down a mortgage rate and commitment that won’t expire before you can get to closing.

5. It's not only about price
Unless you are an investor, it is important not lose sight of the fact that you're buying a house to live in. Buy a house you like, not just a house that you got a great deal on. Compare the short sale house to others that you have seen with similar features than may not be short sales. A short sale is only a bargain if it's a home that you truly want to live in -- not something you're drawn to only because of its low price tag. And if you are considering buying a house that you know up front you’re going to want to extensively remodel, factor that into your thinking and bidding too. Getting a great deal on a house that you need to immediately put $50-100K into to “get it right” may not really make sense.

Short sales aren't all long, drawn out affairs. It really depends upon the bank involved. Some banks are so well managed in their short sale process that you can get an answer in a day or two and some are so bad that Realtors will try to avoid having to deal with them because they know it will be a 2-3 month ordeal. Local Realtors usually know and can tell you, which banks or lenders are the worst to work with on short sales and foreclosures. Short sales also have the advantage that the home is usually still occupied during the process, so there is less likelihood that vandalism will occur.

House sitting foreclosed homes...

I just recently read a good article by Phoebe Chongchua on Realty News about the growing phenomenon of house sitting in foreclosed homes. Vacant homes often don’t appeal to buyers and are susceptible to vandalism; so, these days, some real estate companies are suggesting house-sitters to help keep the home maintained and give it a lived-in feel. I haven’t seen this being used in my area. I’ve seen news stories about squatters occupying vacant houses but not official house sitters.

According to Chongchua, the house-sitting strategy is being used with foreclosed homes and involves allowing people to live in the property for little rent (some as low as $400 per month) in exchange for house-sitting the residence. Typically, the house-sitters or caretakers are responsible for keeping up the home, paying for utilities, and any homeowners’ association fees. They aren’t usually offered a lease term and they’re required to move out with as little as five days’ notice if the home sells. It’s not for everyone, but house sitters call it a win-win situation for people seeking less expensive rent and for owners of vacant properties.

The details of what the house sitters are responsible for vary depending on the agreements between the homeowner and house-sitter or company that’s helping fill the residence, but generally the house-sitters are expected to perform a variety of household tasks. Basically the tasks are things that most homeowners either do or hire someone to do for them, such as, cleaning furnace filters, fixing dripping faucets or toilets, changing light bulbs, removing their own accumulated trash, as well as helping to care for the yard. House-sitters are not allowed to bring pets or smoke in the home.

Some companies such as Homes in Transition, a house sitting company based in Albuquerque, New Mexico, offer the house-sitter the option of paying into a monthly maintenance service program so that when household problems occur, the general contractor associated with the company can fix them. The service program follows the house-sitter. So, when relocation occurs the services are then transferred to the next property the house-sitter moves into. Read the whole article at www.tinyurl.com/d5yvvt.

I suppose that, if I were a house sitter I might get tired of the quick notices to move out when the place sells; but maybe that fits into their lifestyle.Are you seeing this in your areas? How’s it working out?

Fighting foreclosure rescue fraud…

Realty Times recently had an interesting article about how a California law is protecting distressed homeowners from becoming victims of fraud by predators who advertise themselves as Foreclosure Rescue outfits. (See www.tinyurl.com/cjt6so for the full article.) The gist of the article was an all to familiar story about a distressed homeowner who bit on one of those “I’ll buy your home from you and let you lease it back” schemes.

The predators make it all sound so good – they pay off the mortgage or get a short sale approval from the creditors and take title to the house, with a promise of letting the owner rent/lease it back, sometimes with first right of refusal to buy it back in the future. But what a future it can be. In the story in Realty Times the unfortunate former homeowner got behind on the lease payments and was served with an eviction notice. When they tried to exercise the first right of refusal to buy they discovered that the price was all of a sudden way higher than what the rescue buyer had paid.

Fortunately for these homeowners, they live in California and were able to file a lawsuit to abrogate the original sales contract under the California HESCA law. The California Legislature enacted HESCA (Home Equity Sales Contract Act) upon a finding that “homeowners whose residences are in foreclosure have been subjected to fraud, deception, and unfair dealing by home equity purchasers.” (An equity purchaser is an investor buyer of an owner-occupied home for which a Notice of Default has been filed.) The purpose of the act is to enable defaulting homeowners “to make an informed and intelligent decision regarding the sale of his or her home…” and “to safeguard the public against deceit and financial hardship; to insure, foster, and encourage fair dealing in the sale and purchase of homes in foreclosure;” and to “prohibit representations that tend to mislead.” (To read the entire California law, go to www.tinyurl.com/c9kog5 )

In this case the court upheld the homeowners arguments that they had been duped into a bad contract by a fast-talking investor, who had misrepresented the terms of both the lease and the right of refusal on a future sale. Even though a bankruptcy court had approved the deal (the bankruptcy judge claimed not to have been concerned about the terms of the deal, only that the debt be paid off) the judge hearing the HESCA case agreed that the investors had not been forthcoming about the buy-back provisions in the sale contract and threw it out.

I’m not sure that we have any such protections in Michigan. I sure know that we have a lot of these “foreclosure rescue” clowns running around making similar offers to distressed homeowners. What’s happening where you are and do you have laws to protect your homeowners against this type of fraud?

Where are we inthe current cycle?

I recently saw a great set of charts and explanations of the current economic and housing mess that we are in, which help one better understand where we might be and what lies ahead. First lets get to a chart that I composited from a stack market web site and my own thoughts on what we've been through and where we might be.

I really believe that we can trace a lot of the current mess that we are in to the September 11th incidents that put the country on alert and started us on a path to war in Iraq, so I put that part in. The housing market was still in euphoric state and indeed it continued in that mode well past 9/11. Housing values had been climbing at double digit rates for a while and continued upward until sometime in the 2002-3 time frame, before anxiety took hold and things started back down. They have been sliding ever since, as first denial and then fear took hold in the market and the economy. It was likely the grip of denial on at least General Motors that got them into so much worse shape than Ford Motors is in today. But then, denial has always been big at GM.

Denial also was the watchword from most homeowners, who just refused to believe that the outbreak of foreclosures and falling values could affect them. I'd say that we made rapid progress through fear, depression and panic and have now entered the capitulation stage and maybe the early despondency stage. Those aren't good and they have brought a lot of pain, but they are something that we need to just get through, in order to move on. So maybe the phrase "bumping along the bottom", which I hear from some economists, refers to the stages of capitulation, despondency and depression - each a bump in the road towards recovery.

I certainly think that President Obama leveraged the need for Hope during his campaign and is nourishing it now, as he and his financial team try different things to try to fix various broken financial systems. He's pointing towards Recovery, but it feels like it may be at least next year before we get to that stage.

When we do start up the other side of this cycle, and get to optimism and excitement and beyond; let's hope that we can substitute in a bit of common sense at the Thrill and Euphoria levels, instead of just the stupidity and greed that was there before. That's where proposed new controls and regulations will come into play.

Of course the problem with all of these charts is that they really give one no timetable at all for each stage. We are now in the longest recession since the great depression and no one is predicting the end yet. Many economist are now pointing to 2010 as the turn around year. I guess that would mean that we're left to wander in the wilderness of capitulation, despondency and depression for the rest of 2009. Not a happy thought.

So, let's end on a happier note. Since hope is the next stage and the way out of this mess, we all need to be beacons of hope in the gloom of the current market. The more we can present a positive and upbeat picture of the market, about what a great time it is to buy, what great choices are out there and what great mortgage rates are available, the more we shine as beacons leading towards hope. Let your light shine today!

Is there an ROI to Social Networking?

I recently read an article titled “The Squishy ROI of Social Networking” by Andrew Conry-Murray in InformationWeek, one of the IT Industry trade rags that I still get after a long career in that industry. This article focused upon the use of SN software to create corporate SNs inside of companies and asked what, if any ROI there was to those networks. The SN software discussed and in use inside companies included FaceBook-like nets, Blogs, Wikis, Twitter and the like.

In most cases the SNs are set up inside the company, away from the public view, and meant only for the use of employees. The promise (or hope, as the case may be) is that employees using these networks will somehow improve company efficiency or save the company money or come up with new ideas or do something that adds some value to the company. Most of the article focused upon how hard it is for most companies to measure any ROI on these networks.

One thing that I noted in the article and which I have opined about before, is that the focus was on the Return side of the ROI equation, with little to no real information about the Investment side and what that means. It appears from the article that many companies just set up the infrastructure – the software on the company intranet – and step back and wait for the magic to happen. Even the five best practices mentioned in the article had nothing about the Investment that the company must make, and more importantly the users must make, to make SNs work and have value.

I believe that is the key to success for both companies and individual users of SNs – invest in them through participation. For companies that means doing a lot more than just having everybody sign up and fill out a profile. It means doing the education necessary for the users to understand how, when and why to use the new tools and to understand what good may come out of it all. It also means giving the process time – time to build up a meaningful database of posts and blogs and discussions and Wiki entries, so that there is something worth searching by someone else.

If you hope to leverage the quality experiences of all of your plants, then you have to give the plants the encouragement and time to maker posts about their best practices. If you’re a Realtor hoping to find new ways to improve your business, then you should ask questions in discussions and blogs and read the answers. It’s really amazing what people are willing to share, especially if they hope to get back something some day when they have a question.

So, the key is to encourage investment, not just of the money necessary to build out the technical infrastructure, but of the time of the users, so that the real value is realized through shared knowledge. Is the ROI really “squishy?” I suppose for some that will be the case, but for those willing to invest in the process it can be quite real and likely measurable. What’s your feeling on the return on the investment that you make in Social Networks? Are they worth your while?

Fire up your mind and participate

“The mind is not a vessel to be filled, but a fire to be kindled.” (Plutarch) from the Jack’s Wining Words Blog. As usual, Jack’s words serve to provoke thought about what I’m doing to fire-up my mind. There is a tendency to passively fill one’s mind by reading or researching, but never taking action on the information that is gathered.

In forums like Blogs and SNs that tendency plays out in the number of people who are “lurkers” – those who sign in and read the posts, but never comment or post themselves. That is passively filling your mind, but not taking any action. When you read a Blog post or discussion topic you should have some reaction, one way or another. Do you agree with the author and maybe have some experience of your own to add to the comments, or do you disagree and want to say so and share your point of view on the topic. Either way, you have something to say, so say it. Post a reply.

I teach people in my company about SNs and how to sign up for them and use them. I don’t go into a bunch of stuff about personal branding, but I do talk a lot about participation. I have noted several local Realtors who signed up for SNs like Facebook, LinkedIn, AtiveRain and Twitter and never returned after the day that they sign up. I guess that somehow they believed that just the act of signing up and being able to say “Yeah, I’m on (fill in the SN here)” is enough to make them seem cool, modern and up-to-date. Wrong! If you don’t participate you are invisible.

Some Realtors in particular have also decided that these SNs are like big, public advertising boards, sort of like the bulleting boards at the local supermarket or hardware stores. So they just post and post away putting their listings on them, without ever really participating in any other aspect of the site. Apparently they have nothing more to say than, “I have these houses for sale.” Rather dull, don’t you think?

My view of these sites is that they provide an electronic equivalent of a good cocktail party with others in our profession or with members of the general public, or both; and, as such they provide a forum for discussions between the partygoers. Now, you have choices of how you are perceived at the party – you can be the wallflower who stands in the corner and never talks to anyone, or you can be the bore who incessantly talks only about themselves, or you can be the person that you avoid because you hate to get stuck talking with them, or you can be the person around who others gather because you have interesting things to say or you contribute intelligently to the conversation. Which are you at the party and on the SN Blog/discussion sites?

The Boomers and Recession

From Iconoculture, a lifestyles and culture tracking news feed that I receive, come this story about the Great Recession meeting the American work ethic. Only one in three Americans believe they'll ever be able to retire fully, according to a January 2009 survey by Scottrade (BusinessWire 2.25.09).

That belief is driven entirely by fears about the economy, low personal savings, and the terrible decline in IRA and 401(k) portfolios that has occurred since September 2008. Not only have those accounts deflated, but because of near-term financial pressures, Americans are less likely to be making any contributions.

Who's the most pessimistic about retiring? Boomers lead the nervous Nellies, with 67%concerned about having enough money to retire. Gen Xers are right behind: 64% are stressing about saving for their twilight years. Millennials are remarkably optimistic — but then they have all the time in the world, right?

Boomers have been hit hardest by the Great Recession — not because they're losing their jobs (they're actually doing OK in that respect) but because they're losing their nest eggs.
Americans love to work. And now, thanks to the economy, they feel they'll have to work. What about social security? They're not counting on it.

What does this mean for us as Realtors? I am already starting to see articles that now forecast the expected flood of Baby Boomer retirees into t he downsizing real estate market may be more like a trickle. Why? Maybe because the Boomers have lost most of their equity in the McMansions that they now own.

A big part of the problem that I hit with the older Boomers (maybe really into what is sometimes called the Matures) is that many have owned their homes since the 70’s and 80’s and they believed all of the press that they read about how their homes had appreciated. The houses that they bought originally for $80-120K (back when that was big money) had supposedly appreciated up into the mid $300K’s (some even higher) by the early 2000’s. They felt really good about being able to cash out on that investment as a part of their retirement.

Now I come along and have to tell them that their homes are only worth the low $200K’s maybe less and they are furious. Further, I have to advise many that they have lowered the values themselves by not investing in updating the house over time. Shoot the messenger is the common reaction. For me anyway; in this area, older, long-time owners are proving to be some of the most difficult to deal with, in terms of getting listing pricing right. What about you and your area?

Now toxic Chinese wallboard!!!

If it wasn’t bad enough that we had a public outcry and lawsuits about lead in Chinese-made toys and toxic chemical filler in Chinese manufactured baby formula, now we find out that the Chinese may even be screwing up our houses. From a story in USA Today comes this report.

Several home owners are blaming some drywall imported from China in the wake of Hurricane Katrina and Wilma as giving off a foul odor and causing a range of health problems, according to a lawsuit. Remember a few years back when carpeting was discovered to be gassing-off formaldehyde that caused severe allergic reactions?

Several class action lawsuits have been filed, including claims against U.S. homebuilder Lennar and a Chinese drywall manufacturer, Knauf Plasterboard Tianjin.

Lennar, which has been replacing drywall in some homes, says it didn’t approve the use of the imported drywall. Knauf says it wasn’t necessarily the manufacturer and that the drywall has passed tests that have indicated that it produces no health hazards. I suppose next we’ll read that several complainants say that they don’t really live in those houses either, but they do have a rash and figured the Chinese must be involved somehow.

The Consumer Product Safety Commission and Florida regulators are investigating. One estimate suggests 60,000 homes may contain the drywall. Attorneys who have filed the suits claim residents have suffered rashes, new allergies, asthma and sore throats. Attorneys are calling for monitoring of the alleged victims and of course for compensation, if for no one else, at least for the attorneys.

I certainly don’t know if there’s validity to these claims or not, but the truly sad thing is that there are really no effective protections for the American public against most of the issues that we’ve been seeing news about for the past few years. The agencies that were originally set up to test and inspect imports and protect us against imported health issues, like the Consumer Product Safety Commission, have been gutted or effectively neutralized over the years by budget cuts Administration policies during the last few administrations, in deference to “free market” pressures.

I guess they meant that you are now free to get sick and die using cheap free market products from countries that don’t have to abide by our laws or product safeguards. Of course, as our recent peanut scandal pointed out, we can’t even protect ourselves from our own countrymen, much less from a foreign supplier. Who knows, maybe Knauf Plasterboard made their drywall using U.S. peanut by-products as filler in the paper.

Everybody can do something...

“Nobody can do everything, but everybody can do something!” as seen on a t-shirt recently and likely a quote by some one notable. I might change the last part to read “Everybody can do something different.,” as I have opined here recently. The key here is to act, to do something and not be frozen into inaction by circumstances, whether they be the economy or anything else.

There is a tendency when times get tough to pull back, to hunker down, to crawl into a hole and hide, until it is over. While it is certainly prudent to review one’s spending on advertising and other marketing expenses in these tough times it is literally impossible to save one’s way out of the mess that we are in right now. In fact a case might easily be made that now is the time, more than ever, to increase spending in some of those areas. As the markets concentrate down (I used the analogy of a pond drying up recently), it is more important than ever that the fewer buyers who are out there be able to find you. That doesn’t happen if you’ve become “invisible” in the market, with no ads, no mailings, nothing to get or keep your name out in the market.

So, what are you to do? I’ve given up the full page ads in any of the local booklets or papers, but find that the agent-shared pages or ads will keep my name out there. I still do my monthly newsletter to my SOI base and I manage to get a quarterly farming postcard mailing out. My Web sites ( I run four real estate Web sites that I maintain myself) are still paying off with 1-2 leads a month and even these SN networks are starting to generate some leads – I participate in Facebook, Twitter, Activerain and LinkedIn.The key word there is “participate”. If you just sign up but never post a Tweet or a Blog entry and never comment on anyone else’s Blog entries, then you’re just wasting your time. You have to be active.

After a long hiatus, I got re-started doing open houses this weekend and met 20 people that I didn’t know before, so open houses pay off (as they always have). I haven’t done floor for a while and probably need to get back to that, too. In these times none of us are “too good” to do some of the things that we maybe stopped doing or just felt that we didn’t have to do any more. Let’s face it, that’s where the public is these days (along with being on the Web) and the public is one of the best sources for new business. I don’t have a 20-year tail of referral business following me around yet; so, I can use all of the new business that I can get.

Maybe I can't do everything, but I’m determined that I will do something and maybe something different that hopefully will work for me. What are you going to do?

Happiness is a decision...

That headline appeared in the this month's Ladies Home Journal as a quote from Michael J. Fox. I remember watching Michael as Alex P. Keaton on the show Family Ties and later in his movie roles in the Back to the Future movies, and in his last series role Spin City. Michael's battle with Parkinson’s disease is also well documented. It's a testament to his character to make that statement and discuss his own choice to be happy, given his situation.

For whatever strange reason I also thought about Steven Hawking. Here is a man who was healthy until he was 21, when a motor neurological disease - amyotrophic lateral sclerosis [or ALS] - similar to Lou Gehring's disease literally robbed him of his body. Yet he went on to become one of the premier scientists of our time, a renowned astrophysics expert. He made the choice to be happy with what he has.

So, when I get down every now and then and start whining about things, I have to remind myself about all that I have to be happy about - a great wife, a nice home, wonderful children and now grand children, a faithful dog and so much more. The really nice thing is that I have those things, whether I have much money or not. Sure times are tough right now in the real estate field, but I'm surviving and I've got some great young customers to help find their first homes and a few my age to help find retirement homes for; so, I'm keeping busy. I've got a few owner-occupied homes listed and a few more in the queue. I missed the REO wave, but I'm not going to let then bother me. I've made my decision and I choose to be happy! What have you chosen?

Photos from Wikipedia.

When the small pond dries up…

In every pond large or small there are the big fish. In small town America these are likely to be the home town hero who never left town or who came back to town when he blew out his knee and his athletic career was over. They are the glad-handing, back-slapping loud talking, good ole boys who always seem to be on top of the world.

But what happens to the big fish when the small pond dries up? They may be the last to end up flopping away in the mud, but eventually they end up there – stranded by the evaporation and a lack of anywhere else to go. That has certainly happened all over America to the small town movers and shakers who were the builders and shop-keepers and landlords of the village or town.

In my little patch the 5-6 local builders have pretty much all stalled out on the developments that they had going and now most are scrambling to get enough remodeling work to stay afloat. If there’s any bright spot to be found, it’s that the larger, out of state companies that were stealing way customers have faired even worse and most have exited the state, many going bankrupt in the process.

Even the big, super-team Realtors in the area have shrunk to the point of being almost normal competition. Many of them missed the foreclosure boat and didn’t land the prestigious (used with tongue firmly in cheek) REO management accounts that now make up the super teams. If you’re not an REO properties listing agent these days, you’re not doing much business. You have to wonder what they’ll do when the REO pond dries up – and it will.

In my little patch, being the biggest agent in my little village would mean being broke, since not much is selling there. A combination of relatively high taxes and sellers who refuse to get real about home values has relegated my home market to a secondary market status. Markets on all sides of me are doing OK and that’s where I’m focused right now, but for now it makes little sense to focus much effort on my home market. It is a small pond that has dried up.

I’m sure that it will come back, but not until things get better overall and until more buyers willing to pay the premium to live here are out in the market. I have mixed feeling about that, since I’d prefer to be doing more business locally; but, at the same time, the local stubbornness has kept home values up better than in surrounding communities. We have homes 28 on the market in the $400-500K range for which the average Days on Market is now at 2 years – how stubborn is that?

So, for now, I’m off to try to be a good little fish in many other ponds. I’ll keep in touch with my local market, but I can’t depend upon it to make a living and that’s the first order of business. And I’ll keep an eye out for the coming rains that will refill the pond. Is that a rainbow on the horizon?

Living with a two-tier market

I’m convinced that we have evolved into a 2-tier market that has stranded most Realtors in one tier of that market. Basically we have a market composed of a tier that is made up of foreclosed homes (short sales are just a pre-foreclosure class in this tier) that are in one price category and then a second tier that is made up of owner-occupied homes that are in a different and much higher price category. I guess that this wouldn’t be all bad, just a normal market pricing scenario in a free-market society; however, the way the real estate market has ended up working the foreclosed houses in particular have become concentrated in the hands of a few REO specialists, while the remaining Realtors in the market got squeezed into the owner-occupied tier, which is both shrinking in percentage of offerings and stretching out in time to sell.

Now to be fair, many Realtors avoided the REO market when it first started growing, preferring not get their hands dirty with foreclosed properties and all of the REO management responsibilities that may have come with them. And, in the beginning, there was quite a bit of confusion and frustration associated with foreclosed houses, mainly because the banks got overwhelmed and had no idea how to manage the process. The same may still be said about the short sale process today.

But, when foreclosures grew from a historic niche of less than 3% of the market to the present day of 25-50% of the market, depending upon where in the country you may be, all of a sudden it became critical that you be into handling foreclosed houses. Unfortunately many banks and lenders had chosen REO partners by then and, in our area at least, we saw the rise of the REO super teams – whole offices or teams dedicated to managing hundreds of foreclosed houses at a time. That has left little for the latecomers to this party and one cannot expect the banks to do anything to remedy that situation. In many cases the banks used the allure of a high volume of transactions to negotiate better listing commissions with these teams.

So now we have two tiers – the haves and the have-nots, in terms of REO listings - and along comes the worst recession since the great depression and the “regular market” (the owner-occupied market) tanks big-time as FUD freezes the move-up buyers who drive that market. The main things selling in many areas are REO homes. The non-REO real estate agents out there are certainly scrambling to get their share of that market by representing the buyers, many first time buyers; but they are finding that they must work much harder for much smaller payoffs. The result is easy to see in most areas – shrinking agencies, agents leaving the business or getting “day jobs”, and even big, brand name franchise operations are going bankrupt around here.

In our Detroit area market, we ended 2008 with 50% of the business being foreclosures, 16% short sales and 16% leases, with only 28% being “regular” owner-occupied sales. That’s a tough mix to make a living in, if you are a “regular” agent and not an REO listing agent. In my little 7-township patch of that market we have been running 70+% foreclosure sales since January 1, so things have moved in the wrong direction. So the wide, vast plain of opportunity that I surveyed before me when I got into this business has shrunk to a narrow ledge on the side of a very deep crevasse and I’m trying hard to hang on to that little piece. Of course all things are local, so this may not be the case in your market. Has your market developed the 2-tier model? What are you doing to adapt to the changing times?

Do something different

“Fear less, hope more. Eat less, chew more. Whine less, breathe more. Talk less, say more. Love more, and all good things will be yours.” (Swedish Proverb) from the Jack’s Wining Words Blog. As usual Jack hit the nail right on the head with this recent post of a Swedish proverb.

One of the things that’s I’ve noticed in posts to my discussions of the current real estate market is that lots of people are stating that they are “going in every day and working hard, but seeing less business.” That may indeed be a very succinct way of stating a good part of the problem these days, if one thinks about it a bit. We are all working harder, doing lots of things; but, they are the things that we’ve always done and we’re doing them in a market that has moved out from under us. The people who are currently succeeding are those who decided a year or two back to do something that they’d never done – work with REO listings. When the market moved our cheese, too many of us didn’t move with it – me included. Now it doesn’t matter how hard one works at doing the same old things that we always did – it just isn’t the way to be successful in the current market.

So what are we to do – we who missed the REO boat and don’t have REO relationships with lenders? The main alternatives that I see for us is to become the experts at a few things that still present somewhat viable market opportunities – working with first time buyers (who now make up the biggest buyer segment in my area), helping distressed homeowners with short sales as an option to foreclosure, or focusing upon leases with the people displaced by foreclosures. There is another option, that of working with investors who are snapping up foreclosed homes; but that, too, requires relationships that may not be in place with those investors.

There are many techniques that I’m sure can be discussed about how to go about increasing your business in those segments, everything from holding First Time Buyer Seminars or Short Sales Seminars to buying into local legal news feeds about delinquent homeowners. For my part, I have also created a Web site for first time buyers – http://www.mihomebuyer.com/ and one for short sales – http://www.mishortsales.net/ which have both gained some traction locally. I do find that I’m working primarily with first-time buyers right now and I have several clients looking for lease properties. The short sale side has been slow, but I have had a couple of opportunities.

I guess the key is not just to “do something”, it’s to “do something different!” What are you doing in your area that is different and what’s working for you?

Is this a great country or what?

A story over last weekend in the New York Times by Ron Lieber (03/14/2009) reported new programs starting out on the West Coast to make home loans available to those who have lost their homes to foreclosure.

The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the last two years, says Todd J. Zywicki, a professor of law at George Mason University.''It just seems obvious that a foreclosure in 2008 or 2009 doesn't have as much information value as a foreclosure five years ago,'' he says. ''To the extent that foreclosure doesn't predict future behavior as much as it did in the past, you'd expect that the FICO algorithm would change to adjust for that.''



One of the country’s largest credit unions Golden 1 has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one. BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ''How to Lend to the Newly Credit Impaired.” Isn’t that a catchy phrase?

This is going to be a vexing problem all across the United States as lots of basically good people, who went through a bad patch and lost their homes now try to get back to a more normal life and buy a new home. One can only hope, of course, that the banks do a much better job of making sure that these people can afford the homes that they now want to buy and don’t saddle them with new toxic loans that will reset in a year or two and cause a second wave of foreclosures.

I’m confident that better controls will be in place in the financial markets to watch how these new loans are packaged and monetized into the secondary market. One can only hope that these people have learned enough from their unfortunate experience to better manage their credit in the future.

We’ll be alright until we hear Billy Mays screaming on the TV – “Had a foreclosure? No problem. Have no job and no money? No problem, get your loan here.” I think that’s what happened last time, isn’t it?

I wonder if any of these programs will allow the borrowers to buy a foreclosed home with no money down? They’d almost have to call that the “Irony Loan” wouldn’t they?

Stepping up in tough times...

“If you don’t go after what you want, you’ll never have it….If you don’t step forward, you’re always in the same place.” (Nora Roberts) from the Jack’s Winning Words Blog.

As always, Jack finds words to inspire or cajole one into doing something and not just sitting there in despair. Sure the market is down and it’s tough to make a living selling real estate these days, but I refuse to stay in the same place, so I’m going after the success that I want. That means new tools, new techniques, trying new things, doing things differently, doing whatever it takes, to make this job pay off.

There are still people out there buying houses. I just don’t get enough of them, so that’s something to fix.

There are still people out there selling houses. Not all of them choose me to list their home, so that’s something to work on improving.

Foreclosed houses are selling much faster than owner-occupied homes and more of them are selling that any other category. I don’t have foreclosed houses in my inventory – got to work on that.

Real estate is always a numbers game. The more houses that you have listed the better. The more buyers you are working with the better. So, I need to get my numbers up.

It’s time to step forward and really go after what I want. I know what I have to do, but I’ve been putting it off or avoiding the parts that I really don’t like to do. In this environment that is no longer possible. If I can’t do the things that I don’t like to do that are a key part of the job, then I can’t do the job and expect to be successful at it. It’s really that simple.

If I hate making cold calls, I’ve got to make the calls. If I don’t like dealing with FSBOs, then I have to call on FSBOs. If the thought of knocking on doors terrifies me, then I need to suck it up and get out in the neighborhoods.

There are too many potential sellers sitting on the sidelines just waiting for me to help them understand that they can sell their homes now. There are too many potential buyers wasting time driving around looking for homes with for sale signs when I could be showing them homes that meet their needs. There are too many FSBOs who don’t understand the value of having a Realtor represent their home and probably lots of disappointed Expireds who got discouraged with the process and need a reason to relist.

Wow, the potential is huge for those willing to make the effort and go after what they want. You’ll have to excuse me now, I have lots to do.

When quiet isn't good...

All's quiet on the Western front, and on the Eastern front, and on the Southern Front and on the Northern front. Let's face it, it's just too darn quiet out in the market right now, at least in my little patch. Obviously, The general economic environment plays the biggest role in this market slowdown; however, I believe that confusion has also played a role.

There are so many news stories about so many different programs, with so little actual detail about how they are supposed to work that potential buyers don't know whether to wait or proceed. They don't know which programs they might qualify for or what they have to do in order to qualify. Even worse, the very people that they depend upon to help them understand all of this - their mortgage reps and Realtors - haven't got a clue either, because the implementation details aren't out there yet.

I'm advising anyone who is considering a short sale to go to my Web site http://www.mishortsales.net/ and follow all of the links in the beginning that will take them to articles about various programs or groups to help with loan modification and workout programs. If I read all of this correctly there should be lots of help forthcoming from the banks and others to try to keep people in their homes. The problem seems to be that many of the lenders have no idea what to do either or don't yet have implementation policies and programs set up yet. It's all a giant mess!

If you are a first time buyer, I'd advise you to get out there and find one of the great bargains that is on the market right now. There are lots of articles about the new (for 2009) $8,000 tax incentive for first time buyers, so read a few of them and understand whether you qualify and how to go after that benefit.

If you are one of the majority of homeowners who is not in distress on your mortgage there may still be ways for you to benefit, even if it's just to take advantage of the low mortgage rates. For some who are currently upside down on homes values, some of the programs provide ways to approach your bank about resetting the principal amount on your loan to help get you back to even. Not all banks are enthusiastically pushing that program, as you might imagine, so you'll have to push for that yourselves, if you even qualify.

From what my local mortgage people tell me, we should have enough information by the end of March to begin to see some of these programs taking hold. Hopefully that will do what was intended and get things moving again. Let's all hope so. It's entirely too quiet right now!

Big expectations, but little results…

I suspect that dilution as much as anything may dull the impact of the various stimulus and rescue packages that are trickling their way down to the American public. BY dilution, I mean that what starts out on the evening news sounding like a big impressive number (I’m still easily impressed by billions and billions of dollars), ends up being just a few dollars for a few people, once it gets spread across and diluted by the shear size of our country.

Take out local implementation of the homeowner rescue plan – the Oakland County Homebuyer Program, which I posted about here a week ago with the following:

This just recently announced by Oakland County. Oakland County's Homebuyer Program for Vacant Foreclosed Properties is part of the Neighborhood Stabilization Program (NSP) created by the U.S. Congress in 2008 for the purpose of redeveloping and occupying abandoned and foreclosed homes. NSP is funded through the U.S. Department of Housing and Urban Development (HUD), Office of Community Planning and Development under the Community Development Block Grant (CDBG) Program and locally administered by the Oakland County Community & Home Improvement Division.Oakland County's Homebuyer Program provides loans to homebuyers for down payment assistance, closing costs, home improvements or other financing associated with purchasing eligible vacant foreclosed single family homes located within select participating Oakland County communities. The home must be purchased by the homebuyer as their primary residence. This program can provide assistance of up to 49% of the price of the home, in the form of a non-interest bearing loan that does not have to be repaid until you sell the house.

It sounded wonderful and I felt good about reporting it and hopeful that it would help greatly in our area. But the devil was in the details and those didn’t come out for a few days. Once they did, it became obvious that this program is just too little too late to do much for people in Oakland County. A second article a week later stated that eh program really had only about $5 Million and that they thought that they might be able to help about 200 homebuyers. By that time over 1,000 people had applied.

What happens is a fairly common phenomenon in American life. Some politicians back in Washington pass a law that funds an effort to help. They put in a few Billion dollars, hold a press conference and toss it out the door. Well, immediately people start taking their “scrape” from the pile of money. Of course there must be administrators for the fund and they need to get paid and then it needs to be spread out to all the states which means that they also need administrators and they need to get paid, an so o and so on and so on, until it gets down to your local County or City. By then much of the money is gone and what is left must be spread out as much as possible.

So from the Billions that started out in Washington, Oakland County got 5 Million to actually spend helping people buy houses. I guess a drop in the bucket like this is how trickle-down economics is supposed to work. A drop in your bucket and a drop in my bucket – just so everybody get a droop in their bucket. The politicians can point to all of their hard work in Washington to get that drop for you and me, in hopes that we’ll vote for them again.

Could that money have been better spent on a more focused program that would have more impact? Probably, but then every Congressman from every district wouldn’t have had his or her opportunity for their news conference about how they brought home the money for their constituents. So hold out your tin cup and maybe the splash from the drop in the bucket where you live will put a dab in your cup. That’s it, enjoy your stimulus, and don’t forget to thank your Congressman.

Foreclosed homes and mold - hand-in-hand

Parts of this post are based upon a press release from Trans World News – Real Estate news, 3/12/2009. Health problems related to mold is becoming an epidemic, which can be directly linked to the foreclosure crisis in real estate. Mold and foreclosure—there may not seem to be an immediate correlation between the two, but if you're talking about the foreclosure crisis you might see that oftentimes they go hand in hand. Foreclosed homes or buildings can sell for a fraction of their original value, and may seem like a steal: A fixer-upper at a low price. But, while there are plenty of good deals to be found on the foreclosure market, “these homes can also harbor unpleasant guests—such as mold, bacteria, mycotoxins and endotoxins” stated Dr Rajiv Sahay, Director of Lab Services at Environmental Diagnostics Laboratory (EDLab) an AIHA accredited microbiology laboratory.

Bill Radu, CIAQP/Industrial Hygienist with Pure Air Control Services/Building Heath Check®, a national leading indoor air quality consulting firm with over 24 years experience and over 10,000 studies stated “we have evaluated numerous foreclosed homes and we are finding that since the homes have been left unattended, they are enclosed, many in conditions such that the microbial amplification has exasperated exponentially causing significant growth and potential health risk to those who enter.” Temperature and humidity levels have been out of norm for weeks and in most cases months and will produce conditions where microbial contamination can and will proliferate. According to Bill, “The homes are like giant Petri dishes without proper care. The longer the homes sit the worse they get”.

I can certainly attest to the mold issues that I’ve seen in many, if not most foreclosed houses in my area in Michigan. I’ve witness scenes from a little mold around the well tank area or under a sink to basements covered floor to ceiling with mold. I had one house that was so bad that I wore a mask to even enter it, but then decided that the little painter’s dust mask that I was using probably wasn’t enough protection, so I got out. It was very much like the picture to the right, here. If you’ve ever seen what the mold remediation guys wear into those houses it’s like the scene near the end of the movie ET where the government guys came in wearing their “moon suits”.

A lot of vacant homes also develop mold in areas that aren’t easy to see, such as up in the attic or down in a crawl space. Mold can even be hiding inside walls that look on the outside to be perfectly OK. You just wouldn’t see that in a real estate walk-through, but a good home inspector will find it (OK, maybe not the mold hiding inside the wall). People who have mold in those areas may have been experiencing unexplained illnesses and cold and flu-like symptoms for quite some time without a clue as to what might be causing them. It’s not the mold itself, but the toxins that many mold strains gas off as a protective mechanism that makes people sick.

So, if you’re hunting for one of those great bargains in the foreclosed properties market, just beware of homes that have set empty for months and make sure that you get a good and thorough home inspection, with an emphasis on finding any mold in the environment. Mold can be remediated and the house made safe again, but first you have to find it and identify what type it is, so that the proper treatment made be pursued. If the mold is anything other than a small amount of common household mildew that’s a job best left to professionals.

All aTwitter about being Linkedin to Facebook

In addition to this daily Blog, I have now signed up at several of the social networking (SN) sites.

I'm on Facebook and LinkedIn and ActiveRain and Twitter and RealEstateGlobalNetwork.

You may send me a Tweet at www.twitter/com/NormWerner

One thing that was bit frustrating at first was the fact that all of those sites seem to have their own Blogs and I just don't have the time to do them all. Then I figured out how to point them all back to this Blog and now it’s all OK.

My initial impressions were that those sites require a lot of time to keep updated and that most of the posters to them are either searching for someone or trying to sell something. The question that all of them seem to ask the user to constantly update is "What are you doing right now?" That's sort of like that question that you hear people on cell phones asking all the time - "Where are you right now?"

My initial reaction was, “Who cares what I'm doing or where I'm at right now?” But apparently there are folks who do care, or who have nothing better to do that to seek answers to those questions. Within days of setting up my Twitter account I have 14 people "following" me, which means that they are looking for posts from me to answer that question. I’m following 6 people right now myself; including David Gregory of Meet the Press and George Stephanopoulos, the TV commentator. David is the better Tweeter. George just tends to ask obscure questions that require the reader to go to his web site for answers. David give his followers small snippets of his daily life on the road and getting ready for his show.

Actually, as I get deeper into this whole SN phenomenon and read about how people are starting to use the “networks” that spring up around them, it makes some sense from both a personal and business point of view. I’m about over posting the Tweets where I inform the world that I’m going to bed or about to go in a meeting. While those are valid answers to the key question, I’ve concluded that no one really cares and that I’ll need to get with the program of providing something of value in my posts. I direct them here for longer posts, since Tweets (the posts on Twitter) are only about 140 characters long. Twitter users have now set up a group on LinkedIn.com that they call a Twittering group, but which seems like is actually just a big, open blog (they call the posts discussions).

I keep getting invitations to join other SN sites that focus mainly on finding long lost friends or acquaintances, but so far I’ve resisted that.

I did sign up to start blogging on Trulia.com and I post occasionally at Zillow.com, both of which are trying to expand into the SN world.

So look me up or send me a friends invite if you are on Facebook or LinkedIn or ActiveRain and send me a Tweet if you join Twitter. This Friday I’m getting a group from our office together to get all of them signed up for a few of these sites. So, if you hear a bunch of Tweeting this weekend, you’ll know what that’s all about. Got to go have breakfast now (now you know the answer to the question, “What am I doing right now?”).

You have to get into the game, in order to win...

“Don’t be afraid about stepping out and doing something. Losing is not to have participated in the race.” (Colleen Howe) - that advice was on the Jack's Winning Words Blog yesterday. Collen Howe, Gordy Howe's wife of many years died last week after a long battle with Pick’s disease, a form of Alzheimer’s.

Certainly her advice is something to take to heart right now in real estate. We all are searching for something different to do to attract buyers for our listings. The market remains very much focused upon foreclosed houses, with that category making up 70-75% of sales for all of 2009, so far. It seems that only getting aggressive on priocing works to get people in. Then the well cared for house will sell itself to someone who is tired of looking at project houses.

Since I also deal with buyers, I get to see first hand what they are looking for and what those places look like. I would estimate that 80% of the buyers that I’m working with right now want to go see foreclosed houses. And about 60-70% of the houses that we go see need quite a bit of work. However, there are those little jewels that one finds amongst the garbage that can make the hunt worthwhile.

The advice to get in the game is at the message today. You won’t sell your house sitting on the sidelines fretting about the market and you won’t find the perfect house just perusing the internet all day - you have to get out there and look. Call me, I can help with both.

How do I find out if Freddie Mac or Fannie Mae has my loan??

One of the most ask questions these days deals with who is actually holding the paper on your loan. One of the reasons is that Fannie Mae and Freddie Mac both have various programs going to assist distressed homeowners. But, how do you find out if one of them holds your mortgage? Well Wilson Westbrook, a California broker and mortgage agent recently answered that question in his blog on Active Rain and I though I'd share that with you.

To find out if either of these two giants have your loan you need to first call your lender or loan servicer (the one who sends you a mortgage statement every month) and ask them if one of the two have your loan. If they do not want to tell you because some might not or if you do not feel comfortable with the customer service reps answer then you can find out directly from Freddie Mac or Fannie Mae by clicking the direct links below or calling the toll free numbers:

Does Freddie Mac have my mortgage online request form
1-800-FREDDIE (8am to 8pm EST)
Does Fannie Mae have my mortgage online request form
1-800-7FANNIE (8am to 8pm EST)

Once you know who has your loan you can then see if you qualify for the new refinance program that begins today for homeowners throughout America that are current with their mortgage payments but have not been able to qualify for a refinance due to the loss of value in their home.

If you're in California look up Wilson and in Michigan, call Agnes Meisch with John Adams Mortgage, once you've determined that you might qualify for one of their refi programs. She's at 248-535-5566.

Meet my landlord, Mr. Mac (but you can call him Freddie)

From a Freddie Mac press release comes this “news.” Freddie Mac is launching a rental initiative, which will give former owners and tenants of foreclosed property the opportunity to lease their recently foreclosed properties month to month.The REO rental initiative will be managed by HomeSteps, Freddie Mac’s national real estate unit, and implemented through several national property management firms. Freddie Mac has about 8,500 properties in various stages of foreclosure.

Freddie Mac also will continue to suspend evictions through March 31 to ensure that former owners and occupants have an opportunity to explore new options available to them.

To qualify for a lease, the tenant or former owner must occupy the property and show they have adequate income to pay the monthly rental amount established by the property management company based on market rents for the area. Occupants must agree to allow HomeSteps to show the home to potential buyers during the lease period.

As I read this there’s good and bad implications apparent in it. I guess it’s good that the former owners get to stay put; but then, that’s bad too, because having any tenants, much less the former owners, in the place makes it ten times harder to sell. Tenant have a tendency to make it hard to show a place, especially on short notice.

You’ve got to love a brainstorming group where not only is no idea too dumb to mention it’s never too dumb to try either. Maybe Freddie Mac will figure out a way to do a lease with option to buy for the people that they just foreclosed on. Of course they’ll find that they just ruined their credit with the foreclosure, but hey that’s just another little glitch to the creative politicos who are coming up with these schemes.

So to bottom-line this thing: you get foreclosed by Freddie Mac who throws you out and assumes your mortgage and then invites you back at a reduced lease rate(because the "market rents for the area" are almost assuredly going to be less than what you were paying on the mortgage - is this a great country or what?

Great fanfare, big letdown, now cue the clowns...

A couple of days ago (actually on Wednesday, March 4) I posted here about a program that Oakland County had announced to use some fo the Federal monies that it will receive to help potential homeowners buy up some of the vacant foreclosed homes on the market. It was good press and Oakland County got both TV and newspaper coverage of the announcement.

Then yesterday the details started making their way out in the form of follow-up newspaper articles that focused more on the substance than the announcement fluff. It turns out that there is only $5 Million earmarked for this program, which officials admit will mean only about 200 homes will likely be bought under this program, out of the thousands that are currently on the market. Apparently the County has already received more than 200 requests for loan assistance under the program.

Now I suppose that one shouldn’t look any gift horse in the mouth; however, this particular program seems to have been mainly aimed at getting some positive press, more so than actually being designed to do what it was announced to do. I guess a headline “Oakland County Announced Drop-in-the-bucket Program” wouldn’t have generated quite as much press coverage.

Many of the government programs, at all levels, really aren’t going to do all that much for distressed homeowners, when you look into the details; however, all are aimed at getting some positive press, in hopes that good media coverage, as much as anything else, will help generate confidence in the economy. It seems our government has become a PR machine as much as anything.

So crank up the music and bring in the clowns to tell everybody how great things are gong to be. After all a few $Billion here and a few $Billion there and sooner or later it’s all bound to have some affect – isn’t it? Well, here’s holding out hope in Oakland County Michigan anyway.

Polar Plunge Results...

For a few weeks I had a gadget on my blog that allowed people to go in and contribute to the Polar Plunge of Conne Terova from our Real Estate One office in Milford. This was Conne's second year of taking the plunge and she had committed to raise $1,500 in pledges, to be used for the Michigan Special Olympics charity that our office supports.

Well the results are in and Conne far exceeded her goal and was the number one fund raiser with contributions of $2,180. Congratulations Conne. Real Estate One as a company was the biggest contributor again this year, raising $18,000 out of the total of $40,000 that was raised for this cause.

Conne has already started planning for next year, but I wanted to share some of her pictures and thoughts from this year.

Dear Family, Friends, Coworkers & Neighbors~

Thank you so very much for your continued support and donations to our Detroit's 2009 Polar Plunge for Special Olympics of Michigan. The day was cloudy, windy, about 13 degrees and the snow was SERIOUSLY blowing-sideways.

This year, the event was at the Roostertail where the plunge an actual plunge into 9 feet of frigid cold icy water! YIKES! (honestly, the anxiety was mounting as the days grew nearer, considering I do not swim - It didn't help when we arrived and saw the huge truck that said "underwater diving rescue team"!).

My special thanks to my buds that provided me with lots of liquid courage. Great thanks to Brenda who went after everyone and anyone to get more donations...thanks Bren!

I was the last one to go down and the ladder's rungs were frozen when I climbed back up...and then I jumped into a hot tub! wowowowow! It was Holy-Moses Cold!!!

Anyway, with your generosity, I personally raised $2,180 in donations. My company raised a total of $18,000...with a grand total of over $40,000 raised by all the teams...all for a great charity. My thanks to everyone...and yes, I'll be doing it again next year! Hopefully, you can attend...it was great fun!

Obviously Conne is crazy, but she's also a great person who does charity work year around for the two charities that our office supports - The Special Olympics and the American Cancer Society. So get ready to give next year and support Conne's annual insanity.

Do you have too much insurance coverage?

A headline like that will catch my eye every time, but it was especially intriguing because it was in an email from an insurance agent - Eric Chase of our Insurance One affiliate. Now I knew that Eric would also get around to a sales pitch in the email and he did, but still it made sense to read and think about how changes in one’s life need to be factored in to insurance coverage. All to often when big things happen – a job loss or change or maybe some change in the family unit – we all forget to check what the impact of those changes might be on our insurance. Here are the examples that Eric had in his email:

• Auto coverage: Due to the economic downturn, many Americans have lost their jobs. That means they may no longer commute or may have cut down significantly on the number of miles they put on their cars. Lower mileage can translate to lower premiums for some drivers. Talk to your agent about qualifying for a discount if your driving routine has changed.

• Coverage for Collectibles and Valuables: Many people, in need of extra cash, have been forced to sell jewelry, furs, art, antiques and other collectibles and specialty items. Since most of these items require additional coverage beyond the standard homeowners policy, these consumers need to tell their insurers when they no longer own the items so they are not paying for unneeded coverage. Savings could be considerable.

• Home Safety: It is important to note that certain home improvements such as security systems, upgraded wiring, and fire or storm resistant materials can result in insurance discounts. Let your agent know if you have made these types of changes in your home.

• Low Deductibles: The owners of an expensive home need to consider whether a low deductible makes sense. If someone steals the TV, it isn’t going break the bank. Those same consumers need lots of insurance for a total catastrophe, though. Therefore, they may want to take a $1,000 deductible, or even higher, and save 10 to 20%. In fact, increasing deductibles is one of the best and easiest ways for almost anyone to save money on their insurance.

• Insurance discounts: Just ask! They are readily available for consumers who combine family policies, use one insurance company for several types of coverage, or take other measures such as using theft deterrents or maintaining good driving records. This is a main reason why consumers should consult with an independent insurance agent at least once a year to evaluate changing needs and look for cost savings.

• Credit life insurance: As their cash flow declines, many consumers are forced to rely more on their credit cards. However, Trusted Choice® agencies recommend avoiding credit life insurance under any circumstances. These policies, offered by credit card companies and other lenders, extend for the term of the loan and decrease in value over its life. They are designed to protect a third party if for some reason, the consumer dies before the loan is paid off. They provide no protection to beneficiaries, only to the company that offered the credit or loan.

• Specific computer or hi-tech insurance policies: Though this coverage may seem like a good idea with the prevalence of electronic gadgets at home, a standard homeowners policy will cover most basic personal computer and hi-tech equipment. If you have a home with the structure insured for $100,000, you typically have $50,000 of personal property coverage, including computer equipment not used for business. Only people with home-based businesses, laptops used for business outside the home, or elaborate high-end equipment need to consider extra coverage. It’s usually cheaper, and you get better coverage, if you buy an endorsement to the home or home-business policy rather than a separate specific policy.

And here are some things that Eric was thinking about that might leave insurance consumers venerable.

• Home-based businesses: With increased corporate layoffs, millions of Americans are operating full- or part-time businesses from their homes. If you rely on your homeowners policy as your only means of protection, you may find your business underinsured or uninsured in the event of a loss. These policies were never intended to cover business exposures. Consequently, coverage for the items you use in your business such as computers, filing cabinets, tools and inventory are limited to $2,500 in your home and $250 away from home under most policies. Your homeowners coverage provides no liability insurance for your home-based business. IIABA research has shown that at least 60% of in-home entrepreneurs are not properly insured.

• Home remodeling: In the depressed housing market, many homeowners have decided to stay put and make do with upgrades to their current properties. But home renovation can leave people vulnerable to risk. Too few consumers consider increasing their homeowners insurance limits to reflect the increased value of a remodeling job. Most insurance companies require homeowners to insure their home to a minimum of 80% of its replacement value to be eligible for full coverage. If coverage falls below that level and the homeowner experiences a loss, they will be penalized with a partial settlement. In addition, many people don't take basic steps to protect themselves from liability exposure while construction workers are in the home. Unfortunately, it is more common to find shoddy, unqualified, and uninsured contractors in a bad economic climate than when times are good. Consumers should always ask for a certificate of insurance from anyone employed in their home and seek advice from an insurance agent.

• Renters insurance: Those unable to afford homeownership during these uncertain times still have property and valuables they should protect. Renters insurance not only protects the contents of a rented property, but also shields the policyholder from liability. And it’s not expensive (because you’re not insuring the building -- that’s the landlord’s responsibility). A typical policy that offers $15,000 in property protection and $100,000-$300,000 in liability coverage can be as little as $100 a year.

• Your Home’s Value: Although the market value of your home may have decreased significantly in this economic environment, don’t make a quick decision to trim down your homeowners insurance coverage. It is important to remember that your homeowners coverage is not tied to market value, but to replacement cost (the cost of actually replacing or rebuilding the structure if disaster strikes). Construction, labor, and materials costs have remained relatively stable, even in this market. Don’t leave yourself underinsured.

I’m like most of you – I just don’t spend much time thinking about my insurance coverage and what might need to be reviewed or changed. I laugh at the little Geico lizard when he’s on pitching their insurance and I watch the eSurance cartoon characters battling the bad guys in between segments of my news show, but I seldom get up and go check my policies for any of the issue that Eric brings up here. Likely it’s worth the effort. You can reach Eric Chase at (734) 662-0174 to have him help you understand how you might need to change your insurance coverage. It’s not as painful as it might sound and could save you big money.

Antiquated Laws Make Foreclosures More Likely

Many states have laws on the book that make it difficult for homeowners to avoid foreclosure, says a new report by the National Consumer Law Center, which is the basis for much of this post.

While many states have taken steps in recent years to strengthen the rights of renters, only a handful of states have updated their home foreclosure laws, which are now "tilted against homeowners" and acting as a little-understood factor that is helping to accelerate the U.S. home foreclosure crisis, according to a major new report by the National Consumer Law Center (NCLC). Based on a survey of existing state laws, the NCLC report identifies some of the most antiquated state law provisions, including "fast track" foreclosures without any court oversight in 30 states and no requirement of direct notification to homeowners in 33 states upon the initiation of foreclosure proceedings.

The center identifies these state laws as some of the most antiquated and unfavorable to homeowners.

Fast track foreclosure. In 30 states and the District of Columbia, mortgage holders who allege that homeowners have fallen behind on the payments can bypass the courts and move directly to auction off homes. To defend against the action, homeowners must get a judge to review the claims and stop foreclosure. This is not the case in Michigan where there is a well defined process that the lenders must follow over a period of time that is also defined by law.

No direct notification of foreclosure proceedings. In 33 states and the District of Columbia, there is no requirement that homeowners be personally served with a foreclosure notice. Michigan does require notification; however, that notice can be made through the mail and may never be received by the homeowner. Once the foreclosure process is under way notices will be physically posted on the property.

No requirement to find solutions other than foreclosure. In every state but California and Connecticut, mortgage holders can move directly to foreclosure without discussing the issue and other potential solutions with the homeowner. While that’s true in Michigan, my experience is that most banks at least try to see if there is some way to work something out with the homeowner, especially if the homeowner doesn’t ignore the initial pre-NOD (Notice of Default) letters from the bank. All too often that is the case with distressed homeowners who are in denial.

Eleventh-hour payments can be ignored. In 29 states, a mortgage holder has no legal obligation to stop foreclosure even if the homeowner comes up with enough money to bring the mortgage current, including paying penalties and fees. Michigan has a “redemption period”, during which the delinquent homeowner can make good and reclaim the property by paying off the mortgage and any penalties; however, that does not mean just getting caught up on payments.

Big penalties are legal. In every state but Massachusetts, New Jersey and Pennsylvania, a mortgage holder who claims a homeowner has fallen behind in payments can immediately impose default fees and costs that reduce the chances that the homeowner can catch up by making the payments owed.

“The bottom line is that most state laws are not part of the foreclosure crisis solution today; they are a big part of the problem,” say John Rao, attorney and co-author of the report. To read the whole report click here.

Michigan is among the states cited for some of these laws ands practices; however, Michigan does a better job than many on protecting homeowners against overly aggressive and hasty actions by lenders. Still, foreclosure in Michigan like elsewhere, is a slippery slope that once you start down makes it very hard to turn back and recover.