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Tuesday, December 31, 2013

Home Sales to Hold Steady in 2014, but Prices will Continue to Rise

I don't attempt to do forecasts of what will happen in the housing market in the year to come; however, the National Association of  Realtors® does, so here was their press release about what various of their experts see for the coming year.

SAN FRANCISCO (November 8, 2013) – Existing-home sales are expected to retain the healthy gains seen this year, while prices will stay on an uptrend in 2014, according to a forecast presentation at a residential forum during the 2013 Realtors® Conference & Expo.

Lawrence Yun, chief economist of the National Association of Realtors®, said existing-home sales have shown a 20 percent cumulative increase over the past two years, while prices have gained 18 percent, but incomes have risen only 2 to 4 percent in the same timeframe.

“We’ve come off of record high housing affordability conditions in the past year, and are now at a five-year low, but conditions are still the fifth best in the past 40 years,” Yun said. “While the median-income family in many areas will still be well positioned to buy a home in 2014, income is barely budging given growth in consumer prices.”

Yun said the other headwinds moving forward include limited inventory conditions in many areas and mortgage lending standards that are still unnecessarily stringent. “Although home sales have recovered over the past two years, mortgage purchase applications have been flat for the past four years, even with rising sales,” he said.

With higher mortgage interest rates, he expects refinancings to collapse in 2014 to the lowest level in at least 15 years, and hopes purchase applications will begin to rise. “This is an incentive for banks to increase mortgage origination, especially considering the low default rates in recent years. But even with cheap mortgages for the past four years, all-cash buyers stayed high, accounting for over 30 percent of sales,” Yun noted.

Beyond bank motivation, Yun said Washington policies for mortgage lending have been too restrictive. He cited rising fees for Fannie Mae and Freddie Mac, higher Federal Housing Administration premiums, as well as Dodd-Frank banking regulations, which have been strangling community banks. In addition, Yun said banks are holding onto funds for potential Department of Justice lawsuits, rather than making them available to mortgage borrowers.

He said job creation, and hopefully a relaxation in stringent lending standards, will offset higher mortgage interest rates. Existing-home sales this year are forecast to rise 10 percent to nearly 5.13 million, but should hold fairly even at about 5.12 million in 2014.

Limited supplies were the biggest factor in price performance in the past year, with inventory bouncing around 13-year lows, and seriously delinquent mortgages have been trending steadily down. The national median existing-home price for all of 2013 will be up just over 11 percent, to about $197,000; then increase nearly 6 percent next year.

Yun expects the inventory shortages to be felt again next spring. “Housing starts are the only way to alleviate inventory shortages,” he said. “Housing starts need to rise 50 percent to meet underlying demand.”

Housing starts are forecast to hit 917,000 this year and reach 1.13 million in 2014, which is still well below the underlying demand of about 1.5 million. New-home sales are likely to total 429,000 in 2013, and grow to 508,000 next year.

Inflationary pressure may begin to build during the course of 2014, with consumer prices projected to rise 2.7 percent, but Yun said inflation could reach 4 to 6 percent in 2015.  Mortgage interest rates are expected to trend upward and reach 5.4 by the end of next year.

Yun projects growth in Gross Domestic Product to be 1.7 percent this year and 2.5 percent in 2014. “If not for the housing recovery, we could be on the verge of a recession,” Yun noted. “The rent component of inflation is rising, so the only way to tame price growth is new home inventory.”

Since the economic downturn, 8.8 million jobs were lost, but only 7 million have been regained. “We need another 6 to 8 million jobs to get back to normal,” Yun said. The states with the fastest job growth are North Dakota, Utah Idaho, Texas, Colorado, Minnesota, Georgia, Washington, Arizona and New Jersey. The unemployment rate is projected to decline to about 6.7 percent around the end of next year.

Based on the forecast, the top 10 markets to watch for a housing turnaround in 2014 are Salt Lake City; Naples, Fla.; Tampa, Fla.; Atlanta; Boise, Idaho; Houston; Charlotte, N.C.; Denver; Seattle; and Tucson, Ariz.

Also speaking was John Krainer, senior economist at the Federal Reserve Bank of San Francisco, who said near-term economic momentum is weakening, but improvement in growth is expected going forward. “Inflation has been subdued, and is expected to remain below the Fed’s 2 percent target over the next few years,” he said. “Despite improvement in the labor market, the unemployment rate remains elevated but will be falling slowly.”

Krainer notes improved household net worth, aided by rising home values, is supporting consumption spending, but home sales and inventories are not growing as expected. “New-home sales are significantly underperforming, and have been bouncing around World War II lows,” he said.

“There is a big disconnect between rising home prices and inventory slowing down,” Krainer said. Normally, higher levels of new construction would be expected in a rising sales environment.

Krainer notes there is a relationship between the share of underwater mortgages and the number of homes for sale. “In markets where we saw a high percentage of underwater home owners, we also saw lower inventory levels.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

Saturday, December 28, 2013

Hold on to the ability to pretend...

From the Jack’s Winning Words blog comes this thought for today - “When there’s snow on the ground I like to pretend that I’m walking on clouds.”  (Ikkaku, Hosaka & Kawabata).

We use the word pretend when we are children and it is a fun thing to do. Sometimes children will use the phrase “play like”; but they are really pretending. It is the ability to pretend that allows a child to take a crude approximation of a human figure and create a super hero out of it, imagining all sorts of scenarios and outcomes to pretend battles.

Pretending can be a great pastime and is probably actually good for us; no matter what age we happen to be. As adults we oft choose to use other words, liker daydreaming or imagining. Every time the Mega-Millions jackpot gets really huge people daydream about what they might do with the money if they won. Do you? I certainly have spent my share of time in thought about that topic. It’s fun and it’s a release from everyday life.

Retaining the ability to pretend is important for good mental health in adults. Now, that is not to say that people who have moved beyond pretending and who may be living in deep delusion are mentally healthy – quite the opposite.  But, the ability to drift off into a daydream or to sit quietly and explore an imaginary scenario or world in our minds can be a healthy release of day-to-day tensions.

I've written before about the need occasionally regress to one’s childhood pleasures, such as making a funny face in the mirror in the morning while shaving or perhaps engaging in a pillow fight with a loved one. As we get older, most of us get very good at controlling ourselves and bottling up our feelings and emotions. We do that because we are told that this is what adults must do; and, when we are children, we do so want to be accepted as adults.

As adults when we look around in social settings there is no one sticking out their tongue at someone else or making funny faces (at least no one who is sober), so we adopt the behavior of the crowd of other adults around us, because we want to fit in. In general and in public, that’s a good thing. It’s also a stifling thing, because to means we must constantly repress the child in all of us who just wants to come out and play once in a while.

We all need to find that inner child and let him/her out once in a while; whether it be making that funny face in
the mirror or finding other ways to get back in touch with that innocent level of joy and fun. I’ve known a few artists in my life and have noted that many of them still let that childish side come out in how they dress or act. They can pull that off, because everyone allows a bit more eccentricity in artists. I think that what we call eccentricity is really a little of their childish side expressing itself through their dress and that’s a wonderful thing. To be an artist is really to learn to capture and use your imagination through your art. If you listen to great sculptors they will often say that they could “see” the sculpture that they created even as they stood in front of a large, blank slab of granite. Painters, too, have the ability to see (imagine) what they are about to paint, even as they stare at a blank canvas. 

Most of the widely acknowledged motivational speakers on the topics of self-improvement or success in life use the term “visualize”, which is just another way of saying pretend. They say you must visualize what you want to achieve – you must imagine it. They never use the term daydream, because that is too passive; but many use phrases like, “if you can visualize it; you can accomplish it.” Great athletes also often talk about visualizing what they want to accomplish. Sometimes they go over and over something in their minds, imagining what will happen and what they will do. Perhaps these are examples of what happens when the adult creeps back into a process that starts with the child in us all pretending; or, perhaps it is a case of the child finding a way to break out and have a little fun pretending in the adult. Let’s hope it is the latter.

Wednesday, December 25, 2013

The tax man cometh... get professional help from the best

At this time of the year when people think beyond the Holiday season they think about taxes. Those are thoughts that stir fear and trepidation in many. The tax laws just keep getting more and more complex and there are more and more of them to be concerned about. All of this complexity increases the chances that you’ll do something wrong and end up with an IRS audit. That’s the big reason to seek help with your taxes.

I know of no one better to help you with your taxes and, if needed, to represent you at an IRS audit than Gerry Hoffman. Gerry holds a Master of Science in Taxation Degree and is certified to represent taxpayers before the IRS. If you spend any time just talking to Gerry about taxes you’ll come away with a couple of thoughts – this guy is passionate about his work and he knows what he’s doing. This is no “pay me $200 and I’ll fill in your tax forms” guy. Gerry studies the tax laws and keeps up with all of the changes. He knows where all of the legal tax breaks are and he knows where the lines are that you shouldn’t cross. He won’t let you wander across those lines and into trouble.

If you listen to a few of Gerry’s stories about going to IRS audits with clients you’ll quickly conclude that you’d want him there with you if you ever got called. Going into an audit situation like that without someone like Gerry is like going to trial on a potentially serious charge without a lawyer – don’t do it. I particularly like the stories he tells about sitting at the IRS  Audit table with his foot on top of his client’s foot, so that he can remind the client when to keep quiet by gently (sometime not so gently) stepping down. Also his advice, about staying quiet when the auditor leaves the room and until you get all of the way out of the building, makes perfect sense – there is always a chance that they are listening in on any conversations.

Gerry’s a pleasant enough fellow that you might enjoy meeting him at a social gathering and talking about other things; however, he really comes alive when the subject turns to taxes and his passion for that topic shows through. I don’t know about you, but I’d much rather have a guy who is excited and committed to his profession than some part-time tax preparer trying to make a few extra bucks during tax season. That guy will likely be back at his full-time job, if you get called in for an audit. Gerry will be there, ready to make sure that you don’t make any mistakes during the audit and to defend any and all entries that he made on your return.

Give Gerry a call at 248-553-2226 and get professional help this tax season.

And once you get past the tax season, give Gerry a call for all of your accounting needs. The best way to be sure that you are ready for next year’s tax season is to use Gerry year-around as your accountant. That way you can take advantage of tax breaks during the year and not wait until tax time to claim them. He can also advise you about your business and do things like getting you set up as a corporation to get further tax advantages. Being in business is not all a DIY venture. That’s what people like your banker and your accountant are there for - to advise you on matters that you probably don’t have expertise on and to make sure that you don’t make mistakes but that you get the full advantage of the laws that govern those areas.

Call Gerry today and get started on a better 2014.

Monday, December 23, 2013

Give the gift of relief from pain...

Want a great last minute Christmas gift idea? How about the gift of relief from pain? If you know of someone who constantly complains of their aches and pains give them the gift of relief from that pain through therapeutic massage.

Get the lowdown on massage therapy from this weekend’s USA Weekend Health column. You can watch the video from the TV show The Doctors about the benefits of massage therapy by clicking here.

We are fortunate to have a great therapeutic massage practice right in our area – Essential Massage and Wellness Center – at 1641 S. Milford Road, Suite B in Highland, MI. You can go on-line to and book an appointment or buy a gift certificate as a gift. They are running a special right now for a 1 hour massage. You can order the gift certificate to be delivered by email. You can also call at 248-714-9901.

Owners Tammy Ware and Cindy McLaughlin are both certified massage therapists and have been trained in a number of different styles and techniques of massage. In addition, Tammy is a Certified Infant Massage Instructor and prenatal massage therapist. In addition she is a Bellanina Facelift Massage Specialist and has taken numerous seminars including Oncology Massage, Sports Massage, Russian Massage Technique, Myofascial Release Therapy and Thai Vinyasa Massage. Cindy has National Certification in Therapeutic Massage and Bodywork, and has completed seminars in Sports Massage and Myofascial Release Therapy and received additional certification in Orthopedic Massage and Table Thai Massage. 

Also on staff at Essential Massage and Wellness Center are Theresa David; a massage therapist who continued her education, after graduating from the Michigan Institute of Myomassology, and earned a degree in Medical Assisting, giving her more understanding of the human body and how to work with it especially when her clients are recovering from pain and injury. Theresa went to Thailand to study Thai Massage and has completed training in Reiki and Craniosacral Therapy.

In addition to massage therapist, the staff includes Tina Lee, L.A.c., Dipl. OM. Tina has a Master's of Science in Traditional Chinese Medicine from Southwest Acupuncture College in Colorado. Tina is also certified in Facial Rejuvination Acupuncture, a series of treatments designed to improve the look and vitality of the face and decrease signs of aging without the use of botox and cosmetic surgery. Traditional Chinese Medicine and Acupuncture is one of the oldest medicines practiced in the world. For more than 3000 years it has been successfully used to treat a wide range of physical and emotional issues.

I have personal experience with letting the Essential Massage and Wellness Center massage away pain and can testify how great you will feel after a session of therapeutic massage. So take my advice, or that of the TV show The Doctors, and get someone the gift of relief from pain – a gift certificate from Essential Massage and Wellness Center.

Friday, December 20, 2013

December 2013 Video Market Report

Dan Elsea, the President of Brokerage Operations of the Real Estate One family of companies shares his last update for 2013 and looks ahead to 2014. Dan heads up the largest real estate company in Michigan with offices all over the state; so he has a great "view" over how things are going in real estate. He has also been doing this for a long time, so he brings a great historic perspective into his evaluation of where the market is going.

Enjoy Dan's video and then give me a call to sit and discuss how the trends that he sees coming will impact you and your real estate decisions.

Thursday, December 19, 2013

Distressed sales down in, now what?

RealtyTrac is a large database company in the real estate business. They track things like home sales in all 50 states and whether those sales were foreclosures or short sales or normal, non-distressed sales. Recently RealtyTrac reported that foreclosures are down significantly across the board; however, there are still areas of the country with fairly significant foreclosure rates. 

I am happy to report that Michigan did not make their top-10 list of states with lingering foreclosure problems. The top five were
  • Florida: 1 in every 392 housing units received a foreclosure filing in November (down 23% from a year ago)
  • Delaware: 1 in every 480 housing units (up 141% from a year ago)
  • Maryland: 1 in every 618 housing units (up 42% from a year ago)
  • South Carolina: 1 in every 660 housing units
  • Illinois: 1 in every 700 housing units
Rounding out the top 10 are Ohio, Connecticut, Nevada, Iowa and Utah.

In the data that I collect and share every week the distressed homes sales became such a small part of overall sales that I stopped reporting it as a statistic. The data that my company - Real Estate One - collects and shares also shows a significant drop-off in the foreclosure and short sales rates. That’s good news.

Distressed sales, especially foreclosures, depressed the market and devalued entire neighborhoods. Many foreclosed homes were either stripped by disgruntled owners on their way out or vandalized by metal thieves. In the summer many had unkept yards and now they have driveways and porches that are snow covered and uninviting. I don’t know why some lenders haven’t learned yet that keeping up the foreclosed properties on their books will get them the maximum value for the asset.

Short sales have practically dried up in Michigan and I suspect elsewhere as lenders chose to just go ahead with foreclosure if they couldn't arrange a refinance package with the owners. Short sales were always a pain and usually took 4-6 months to complete. I, for one, am not sad to see them go.

So, right now; the hot topic of conversation in real estate in Michigan is not about distressed sales; it’s about lack of inventory and rapidly rising prices. Builders are throwing up new homes as fast as they can (maybe there’s a red flag in that statement somewhere) and resale homes in good condition and priced properly are selling in a matter of days or weeks, rather than months. That’s good if you’re a seller; but, not so good if you’re a buyer. Buyers need to be prepared to act quickly by making a good offer (sometimes above the asking price) on any house that they find and like.

I still get requests from would-be buyers to find them a great deal on a foreclosed or short sale house. I have to tell them “that boat already sailed.” You may still be able to find a home that needs some work and thus has a price to reflect its condition; but, finding that $300,000 jewel laying in the $100,000 weeds is a thing of the past. Get over it and move on. Let's look for that house that's priced at $160,000, but which could be worth $200,000 if you put some work into it.

Tuesday, December 17, 2013

The Michigan Market Report for December

Dan Elsea, the President of Brokerage Operations for real Estate One issues a monthly report on the local Michigan market. Here is his report for December.

The rate of sales slowed in November as it has for the prior three months. It is still strong, but not as strong as this time last year. Inventories continue to fall as a result of an increasing number of listings that are expiring. New listings entering the market have been up for the past six months. Many of those are expired listings reentering the market, which are not enough to raise inventories. For buyers, there is still a significant shortage of available homes for sale with inventories remaining at 10-year lows. At the end of November, Southeast Michigan inventories dropped below 10,000 properties (this is compared to the peak of over 65,000 properties for sale in 2008). Values are up about 8% and new listings entering the market continue to rise. This shows that sellers are seeing some light at the end of the value tunnel and are putting their homes on the market at an increasing rate.

There are more than a few people predicting a flat to declining real estate year for 2014. Certainly with the possibility of tougher mortgage standards, rising interest rates, pent up demand having been released and a relatively flat economic growth, it is reasonable to predict a slow down. After all, we can’t expect to have record years every year (in terms of unit sales) and three years in a row is a pretty good run. We do think 2014 will not be as strong as 2013, but I am more optimistic than most, mainly because there is still quite a bit of buying power left in the market.

The housing affordability index is a good measure of that buying power. Historically, an index in the 120 range (the median family income can buy 120% of the median priced home) is the good spot for a balanced and healthy housing market. In Michigan, we might move that range up to 140 since our values tend to be lower. We are still over 200 in Michigan, so there is still some buyer “slack” that will be capable of pushing up prices and creating multiple offers into 2014/15 (but not at the same pace as 2012/13). The chart below gives an example of what the index would look like given reasonable assumptions for the next few years.

If these assumptions hold, the market will settle to a balance around 2016. There is a positive wild card and that is household income. Income growth has been flat, which does not help home values. But as jobs grow and second income opportunities increase, this supercharges a household’s buying power. Although the median income may not be rising quickly, every job that creates a strong second income, also creates powerful home buyers who can buy/outbid a significantly higher priced home.

A Short Spotlight on the City of Detroit:
The city certainly suffered more than most in the downturn, but its rise has also led the way up. Since 2011, the median price has risen 89% and the average price 69%. Sales are still dominated by investors at the lower end of the market causing the median price to hover around $13,000. Looking behind those numbers we see some strong trends comparing 2013 to 2011. Sales of homes in excess of $40,000 have risen 20% and homes in excess of $100,000 have risen 61%. This shows that with more higher value sales, owners are moving in to replace investors. Midtown and Downtown have a housing shortage as well as key neighborhoods such as Rosedale, University, East English and many more.

As prices and interest rates rise, watch for some of the lower priced areas to heat up even more (Livonia, Redford, East Ferndale, Warren, Detroit, Taylor, Westland, etc.) as buyers move down in value, rather than leave the market altogether.

We had a strong November in buyer activity and sales, bringing some nice momentum into the New Year.


Real Estate One is Michigan's largest real estate company with offices all around the lower peninsula. 

Monday, December 16, 2013

Only DIY if you are capable...

DIY Stock Image

I see many homes that the owners would like to sell that have terrible Do-It-Yourself (DIY) jobs that were botched by the homeowners themselves. In general the bigger and more complex the job is, the more a normal homeowner should reconsider a DIY approach.

Painting a room is simple enough and many homeowners can handle that task; however, for some even painting is a challenge. For most other jobs in the home you should ask yourself several questions before tackling the task:

1. Do I have the necessary tools?  Many jobs that you see professionals doing also involve professional tools that the normal homeowner likely doesn’t have. If your toolbox consists of a hammer, a couple of screw drivers and a pair of pliers; then almost all of the jobs in your home should be farmed out to professionals.

2. Do I have the necessary skills? Even if you took a Saturday class at Home Depot on how to install tile around a bathtub; think twice (maybe thrice) before tackling such a highly visible and difficult job. Maybe you can put tile down in your small laundry room to test your skills. At least it is not in a highly visible area if you mess it up. Don’t try your skills first in your front foyer.

3. Do I have the time and patience? Most DIY jobs that homeowners attempt will take far longer than initially planned (or what the guy at Home Depot told you it would take) and many will offer challenges to your patience and persistence. If you have any Attention Deficit Disorder left in you from childhood, DIY projects can be very frustrating.

4. Do you have a good sense of style? Sometimes called fashion sense, this is your ability to put colors or shapes together in a way that is pleasing to the eye, not jarring or glaring. This is a tough one for many, since few people have a good feel for their own sense of fashion or style. Some have a sense of style, but it is so off-kilter that it puts off others. I have often seen what passes for a sense of Victorian Style in some homeowners turn into nightmarish jumbles of colors and eclectic furniture pieces.

Obviously all of these requirements for a good job can usually be assured by hiring professionals to do the design and installation work for whatever project one has in mind. Sure, it’s more costly to have a pro do the job; however, in the long run it may actually save you money, when it comes time to sell. Would be buyers make lists (mental or otherwise) of all of the things that they will need to tear out and redo. Most of the time those are lists of things that were poorly executed DIY projects. That list of projects for the buyer drives their offer pricing, since they subtract those costs from what they might have offered, had the jobs been done right at the time.

The other issues on some projects are health and safety. Many DIY projects that involve tackling the home’s electrical or plumbing systems can result in either, or both, health or safety issues. Improperly installed electrical outlets or switches can be a fire or shock hazard. Plumbing that is not properly installed almost always leaks and those leaks can cause many problems, such as mold.

Getting back to the simple task of painting a room; even this little DIY job has a whole list of skills and tools and sense of fashion involved that may be beyond the average homeowner. Certainly, just the prep work that should be done before the brush or roller ever touched any paint will test your patience and persistence. It takes professional painters years of practice to be able to use a brush to paint along the wall-ceiling interface of around a window frame in a nice straight line, without overlapping from one surface to another. Most DIY’ers use painter’s masking tape; which is OK if you get a good quality tape and have the patience to apply properly. I see messy looking DIY paint jobs all the time in houses that the owners were trying to prep for sale.

So, am I saying that the homeowner should never do it themselves? No! I am saying that the homeowner needs to take stock of their inventory of tools, skills, mental state and fashion sense before tackling each job that they see needs to be done. Homeowners are all over the spectrum in those four categories. If you have all four for the task at hand, go for it. If not, call a pro. You’ll be happy that you did and some future buyer of your home will be, too.

Sunday, December 15, 2013

Renovation Mortgages and how they work...

HUD & FHA has the 203K loan and Fannie Mae the HomePath Renovation Mortgage; but what are these things and what are the rules?

Both of these mortgages are aimed at modest income buyers who intend to live in the fixer-upper homes that they are buying. They do not apply to investor purchases. Both are set up to allow the borrower to borrow more than the sale value of the house, so that they have money to pay for the improvement of a property that may be run down or damaged at the time of the purchase.

During the depth of the recent Great Recession many homes were foreclosed by lenders or ended up on the books of HUD, FHA, Fannie Mae or Freddie Mac. Oft times the foreclosed owners would strip the house on their way out, taking all of the appliances, lighting fixtures and anything else they could easily remove. If the owners did take it, thieves and vandals often stripped these house, sometimes even taking the copper plumbing out of them., leaving empty hulks that were not habitable.

For a long while, these damaged foreclosed houses were mainly bought up by investors at very low prices and then rehabbed and flipped back on the market. Investors made quite a good living doing that while the prices were depressed. More recently, with prices rising, investors have stepped back out of the picture and people who want to buy a house to live in have been the primary buyers. Programs like the 203K loan and the HomePath Renovation Mortgage were invented to encourage that owner-occupied trend, by providing a means for the buyer to get the money needed to rehab the houses up front, as a part of the mortgage.

The idea behind these special mortgages is fairly simple – a buyer gets estimates on the needed repairs and commits to make those repairs with the extra money within a specified timeframe. Also, the requested money and the repairs that they will fund must make sense in terms of actually increasing the value of the home up to the total value of the loan. So, an appraiser and the banks make the call that the house will be worth the amount being borrowed, once the repairs/updates are made. With a regular FHA 203k, the maximum amount you can get is the lesser of these two amounts: 1) the as-is value of the property plus repair costs, or 2) 110 percent of the estimated value of the property, once you do the repairs. HomePath has similar loan limits.

There are quite a few rules in place in either program to make sure that fraud doesn’t occur and to limit the participation in the programs to those with true need. The bottom line on these programs is that you can get the money needed to make the house habitable, including buying new appliances to replace those that might have been removed and to make repairs, but only up to a reasonable limit and only if the house and you qualify under the programs guidelines.  Rather than try to explain those guidelines in detail, I have researched some good reading for you to do on these programs.

So, do the reading below and learn about these programs. You should be able to tell fairly quickly whether or not you might qualify. Then, get with your lender and see if they have products that support these programs. If not, find a lender that does do these loans. You can get a new home, even if it needs work before moving in, by taking advantage of these programs.


To read more about HomePAth loans go to –


Freddie Mac has a similar Renovation Mortgage program, which you can read about here –

Monday, December 9, 2013

Find your incredible moment today...

From the blog Jack’s Winning Words comes this quote -  “Somewhere, something incredible is waiting to be known.”  (Carl Sagan).  Jack went on to talk about all of the incredible things that are happening or about to happen, such as commercial spaceflight, robotic surgery, and Amazon using robo-helicopters to deliver packages.

As I thought about it, I thought what about modifying the saying a little to read, “Somewhere, something incredible is waiting to happen for you.” If you go through life hoping for and expecting the best to happen, eventually they will. If you believe in people, in their basic honesty and integrity; you will not be disappointed most of the time. If you imagine and visualize the best outcome for whatever you are doing, it is surprising how many times you can make that come true. And, if you strive to find the silver lining in dark situations or the rainbow at the end of one of life’s storms, it is always there, waiting for you to find it.

 I keep a little compilation of quotes handy, in case I need inspiration for a blog post. A group of them are quotes by Robert Brault, a famous writer on optimism. One of my favorites is this one-

Optimist: someone who notices a tall hooded figure with a scythe trailing him and thinks, "Boy, I'm sure glad I'm not a stalk of wheat."

So, don’t be a stalk of wheat today. Be someone who takes every opportunity to find that incredible something somewhere that is waiting to happen in your life. You could just wait to stumble into it or you can look at everything in your life as possibly being that incredible moment and approach it with anticipation and enthusiasm. 

One of the side benefits of being in that mood and mode is that it is contagious and those around you will see it and catch it and everyone will be a bit happier and better off because of your attitude. Maybe that is he incredible thing that you are going to do today. 

Sunday, December 8, 2013

Fiduciary duties vs. personal responsibility

Do you remember the old TV commercial in which Kurt Vonnegut found the word fiduciary amusing? It is a funny word to say, but the concept is central to the real estate business.
One of the bedrocks of the real estate business is the concept of the real estate agent as a fiduciary for the client in the transaction. The Fiduciary duties of a Realtor® are well defined on the site. I like their little memory jogger OLD CAR. The duties that they outline are Obedience, Loyalty, Disclosure, Confidentiality, Accounting and Reasonable Care. With the exception of having to qualify the first one as being obedient so long as what the client asks the agent to do is not illegal, most of the rest are fairly easy to understand. The last one – Reasonable Care – is perhaps the one that is most nebulously defined, mainly because it encompasses the concept that the licensed Realtor is supposed to know much more about the process and thus should be able to guide and  advise the client on all aspects of the process.

That’s fair enough on the surface, but just below that surface is a conflict between fiduciary responsibility and personal responsibility. A real estate transaction is a big deal, likely the biggest deals that the clients will ever make in their personal lives. Yet I have had many clients tell me that they aren’t worrying about things like the documents that they must sign, because as they put it “that’s what I have you for.” That’s a red flag to me that we need to have a discussion about my fiduciary responsibilities vs. the client’s own personal responsibilities.

I certainly try my best to watch out for the interests of my clients, but I also tell them, “Look, you’re the one signing these documents and making this purchase, not me. I’ll be looking them over too, but you need to read then and understand what you are signing.” On rare occasion I might get a client who realizes later that he perhaps should have looked closer at what he/she was signing and will ask, “How could you let me sign that?” The normal answer is that I gave it to them to read over before signing and asked if they had any questions. I’m careful to make sure that I explain that the documents involved are contracts and not just a bunch or words on paper. Contracts have consequences if they are broken

I believe in total transparency in my real estate dealings; so, there are no side emails or conversations between me and the other Realtor involved that are not shared with my client. Anything that I know, my client knows – that is part of the Disclosure duty in my fiduciary role. I never answer on behalf of my clients. I confer with them and then transmit their answer. They may ask me for my opinion and I will freely share that with them; however, the decision is always theirs to make.

I have occasionally hit agents who make statements like, “I’m not going to let my clients do that.” While I may express a strong reservation or provide additional information to help with a decision, I do not make that decision for them.  Even first-time buyers should never be treated like children who can’t make their own decisions. First-time buyers many times just need a more detailed explanation of the issues and the choices and potential consequences of each choice. I take the time to go over that with my clients. I suppose that falls generally under the Reasonable Care duty, but it is one that is often ignored, especially by “seasoned” agents who don’t feel that they have the time to explain every decision. Instead they either make the decision for the client or cajole them into their own point of view.

But, back to the central point; no matter what type of client or agent is involved; it is ultimately the buyers and sellers who are signing all of the documents at closing – they are responsible for their own actions. Having a fiduciary agent does not preempt or replace personal responsibility. An agent could be trying their absolute best to perform their fiduciary duties and still let something slip by them. If it ever came to it, a court might fault them for not catching the error, but it is unlikely to hold them legally responsible, unless evidence of gross negligence or obvious fraud or malfeasance is found.

Brokers and agents have Errors and Omissions insurance to cover inadvertent mistakes and part of the coverage provided by the Title Insurance also might come into play, if the error involves something that Title Company should have caught. If the agent was trying their best, they will have fulfilled their fiduciary duties. The buyer or seller must also have been fulfilling their duty to themselves of exercising good personal responsibility. That’s not what you had me there for.

Thursday, December 5, 2013

Mold - Not a laughing matter, but not a show stopper either

Recently one of the cartoon strips that runs in the local paper had a series of days were they ran cartoons about the travails of a character that they portrayed as a Realtor®. The Realtor had made a sale and was accompanying the home buyer and their home inspector during the home inspection.  In what was supposed to be humorous (and was), a panel showed the inspector shining his flashlight towards a corner and you saw his comment – “What’s that over in the corner, a moldy piece of cheese?”  From out of the panel you also saw the reaction of the buyer – “Mold! Eeeck! I’m out of here. The sale’s off.”

The extreme reaction to the work “mold” was supposed to be funny and I thought it was at the time; although, I could relate to actual experiences that were almost as extreme. I once accompanied the buyers and their inspector on a home inspection of a house that I represented, because their agent couldn’t be there. Two and a half hours into the inspection, with the buyers present the entire time, the inspector removed a dropped ceiling panel in the basement and discovered some discoloration on the floor joist beams of the first floor that he said were mold. As soon as he said the word mold the buyers’ wife started having an asthma attack and had to leave the house. She had been fine until that point and had been in the basement for quite some time. Just the mention of mold set her off.

The mold that we found in that house was later determined to be a very common type that most likely developed as the wood was awaiting use when the house was built. It had long ago dried up and gone dormant. The home owner paid to have it remediated but those particular buyers walked away from the deal. The presence of mold can have that kind of effect on people. You can read all about mold, the various types and the health hazards by just Googling “mold”; however, I caution you to read enough so that you don’t get just the view of a few panicky people. There are a lot of “may cause”, “could cause” and “may be linked to” statements about potential health hazards. There is also lots and lots of advice on how to deal with mold in your home.

Now, I certainly don’t want to suggest that mold is not an issue to be concerned about. Some mold types are more likely than others to cause health problems and many people have heard about the dreaded black mold, which is a big health issue. The truth is that black mold is very rare, but less toxic or non-toxic molds, like mildew, are very common and can be found in most homes. We can actually blame the efficiency of some of the modern building techniques, which have resulted in very “tight” homes – homes that don’t leak air and that are well insulated. That very tightness also means that air can’t circulate in many of these homes, so any source of dampness can linger and provide one of the necessary ingredients for mold to grow. The other is a source of food for the mold – wood is a favorite source.

One of the sources of moisture that I see most often is the improperly vented bathroom exhaust fan. Too many Do-It-Yourselfers try to install their own bathroom fans and just vent the thing right into the attic space above the bath. That dumps all of the moist bathroom air that results from baths or showers right up into the nice wooden attic space. Mold in the attic is the result. The other thing that I see a lot is more disturbing, because the people who make these mistakes are supposed to professionals and should not let this happen. That is, improper attic ventilation. Roofers who don’t install enough roof venting or soffit venting are usually to blame; however, insulation contractors sometimes do sloppy work and just blow insulation right over the soffit vent opening in the attic. They are supposed to install baffles to allow the soffit air to get to the attic. Make sure that you discuss proper attic ventilation with any contractors that you hire to do roofing or insulation work and have them explain what they are going to do to insure that ventilation.

The other usual suspect for a location of mold in many homes is in the basement. If the basement has concrete block walls, rather than the poured concrete walls that have been fairly standard for 30 years or more, it will usually show some evidence of effervescence, which is water seeping slowly through the pours in the concrete blocks. Where that happens it is not unusual to see mold, either on the blocks or somewhere near. There are special paints to seal the blocks and prevent the water intrusion. Basement laundry areas should also be watched for signs of any mold growth. Of course bathrooms, with tubs and showers provide great places for mildew and mold and have to be constantly kept cleaned.

When buying a home, whether it is new build or a re-sale home, a good home inspection should be done and any issues, including mold, should be dealt with in negotiations with the seller. Mold, like Radon or other environmental or health issues, can be effective remediated and the house made completely healthy.  Most mold remediation companies also provides guarantees that mold will not return in that same area for some period of time, usually between 5 – 10 years.  You may get mold elsewhere in the house, but not there.

It is important to note that depending upon the size of the remediation job it can cost from a few hundred to many thousands of dollars to fix a mold problem. That is not an easy cost for many sellers to swallow, especially if the price has already been negotiated down. The sellers may ask that the buyers split the cost of the remediation with them. There is some logic in that request, since it is the buyer who will get to enjoy the mold-free house for many years. That is between the buyers and sellers. So if you find a piece of moldy cheese under the refrigerator, just throw it out and don’t panic. The bottom line is that finding mold in a house does not need to be a show stopper, just something to be dealt with as a part of the transaction.

Wednesday, December 4, 2013

Don't gore my sacred ox...

Lately there’s been a fairly emphatic and certainly urgent effort by the National Association of Realtors and all of its affiliate state and local associations to rally the troops (Realtors around the country) to protect one of the scared oxen of real estate – the Mortgage Interest Deduction (MID).  President Obama’s budget guru’s have begun looking at reducing or eliminate the MID as a budget balancing measure.

From the National Association of Realtors® (NAR®) site comes this report - In a letter, NATIONAL ASSOCIATION OF REALTORS ® President Ron Phipps said REALTORS ® would reject any tax law changes, including modifications to MID that would impair Americans’ ability to own their homes and to invest in real estate. “The federal policy choice to support home ownership has been in the Internal Revenue Code since its inception,” he said. “We see no valid reason to undermine that basic decision. Indeed, we believe that the only viable tax system is one that would continue to nurture home ownership.”

NAR estimates that any paring back of MID, whether at once or over time, would reduce home values by an average 15 percent. Phipps called that level of wealth destruction “unacceptable,” particularly since “this loss of value is never fully recouped” and it would come at a time when the U.S. economy can’t turn around without a stable housing sector.

I’m not sure what impact there would be if a bunch of Realtors® “reject” the law. How does one go about rejecting a law? If just the Realtors reject the law do others still have to follow it? How does that help the homeowners? Can they reject it, too? Maybe, if they know a Realtor, they can? I suppose that Mr. Phillips meant to say that the Realtors will vigorously oppose the passage of any new law that takes away this deduction.

Another recent effort of almost the same level of urgency concerns laws impacting Flood Insurance that are just now being implemented. From a press release on the Federal Emergency Management Agency (FEMA) site comes this information -  In July 2012, the U.S. Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) which calls on the Federal Emergency Management Agency (FEMA), and other agencies, to make a number of changes to the way the National Flood Insurance Program (NFIP) is run. Some of these changes already have occurred, and others will be implemented in the coming months. Key provisions of the legislation will require the NFIP to raise rates to reflect true flood risk, make the program more financially stable, and change how Flood Insurance Rate Map (FIRM) updates impact policyholders. The changes will mean premium rate increases for some—but not all—policyholders over time

The National Association of Realtors is fighting this issue hard, too, and backing efforts to get a delay on its implementation. A recent NAR press release states - “The bipartisan ‘Homeowner Flood Insurance Affordability Act’ introduced  in the Senate by Sens. Robert Mendendez, D-N.J.; Johnny Isakson, R-Ga.; and Mary Landrieu, D-La., and in the House by Reps. Michael Grimm, R-N.Y., and Maxine Waters, D-Calif., proposes to help millions of homeowners who are facing sudden and extreme increases in flood insurance premiums, which are an unintended consequence of legislation to reform the National Flood Insurance Program.

“The bill takes the crucial first step toward delaying further implementation of some rate increases in the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). This will allow the Federal Emergency Management Agency to complete an affordability study that was mandated by BW-12; propose targeted regulations to address any affordability issues found in the study; and give Congress adequate time to review those regulations.

There are a whole bunch of red flags that go up when I read something like that last sentence above. This is a rear guard action, meant primarily to stop or slow down the implementation of the law, while opponents try to find ways to water it down or shift the cost burden back onto someone else (read that as the taxpayers).

There are two other homeowner tax breaks that expire at the end of the year with a good probability that they will not be extended by Congress. One is the deductibility of Private Mortgage Insurance payments and the other concerns not being taxed on the forgiveness of some amount of the debit when doing a short sale or foreclosure. Both have been significant during the downturn; however, with short sales and foreclosures going down the latter is less important today. Unless Congress acts before January one, both go away for 2014.

Focusing upon the two bigger issues, one must ask is the sky really falling this time or are we once again just subject to the loud protestations of the owners of the sacred oxen that are in danger of being gored?

I have less sympathy and empathy on the insurance issue. I’ve listened to so many news reports over the years from people who live in flood plains saying that they planned to go back and rebuild, again and again. With global warming starting to raise sea levels much of our current coastline may either be underwater or will flood every time there’s a storm. It just doesn’t make long-term sense to keep rebuilding and rebuilding when you know it will flood out again with the next storm. There have been programs in the past for buying out these homeowners, so that they could move to safer locations and I think something along those lines is the only viable long-term solution to this problem.

As for the tax deduction issue; it’s tough to ignore that this is just really a tax increase. It’s the cowards way out for congress and the administration to slowly chip away at tax breaks that people have become used to because they are too afraid to suggest any tax increases or to figure out other ways to deal with the budget deficits. I’d suggest that they take their own budget bull by the horns before they come looking to gore this sacred ox. In fairness, as a disclosure; I don’t have a mortgage any more so I don’t get this deduction. I’d rather be without a house payment than be looking forward to the deduction. I certainly did count on it to help with taxes when I did have a mortgage. Perhaps a slow phase out of this tax break is an answer.

Being from the Detroit area, I’m used to the laments from the automotive companies and local press every time Congress passes new legislation on fuel economy or safety standards. It’s always a Chicken Little reprise of “the sky is falling;” yet it always turns out OK and the industry doesn’t go under just because Congress mandated something new. People need cars, just like people need houses.

Make no mistake about it; these are both sacred oxen to many Realtors and to NAR. Both issues could impact homeownership in a negative way. Both will increase the cost of home ownership, either directly or through the loss of a tax benefit. That scares the bejesus out of Realtors. Things are tough enough already, with a fragile economy and tight inventory holding back the market. Adding increased cost for many and a loss of a great tax break for all will give more people further pause when considering buying a home. But one must still ask, if these two issues are enough to stop someone who wants and needs to buy a home from doing so? I guess that I don’t think so.

Monday, December 2, 2013

Christmas Open House at the Milford Museum - Dec 8

Image courtesy of marin/
On Dec 8, the Milford Historical Society will be hosting a  Christmas Open House from 12 noon until  4 PM at the Milford Historical Museum 124 E. Commerce St. Visitors will see the Museum decorated for the holidays,  listen to Victorian Christmas carols and Victorian Story-telling, and taste Victorian treats. Shop various crafted items and museum gifts for the holidays! Experience Christmas the way it used to be way back when.

The perfect Christmas gift for any resident of Milford is a copy of the book “Ten Minutes Ahead of the Rest of the World”, the history of Milford from its founding through the turn of the century. If you’ve ever wondered about life in the pioneer days or the mid-century 1800’s, when Milford was just getting started, this is a great read. It also has the histories of most of the historic homes in the Village – who built it and when and who was the first owner. The book has great pictures of homes and life in Milford during the 1800’s, as well as the great stories. Read about the great bank failure in Milford and who absconded with the money. Read about the first settlers in Milford and where they came from. It’s a must have book, if you live in Milford.

Tours of the Museum will be conducted by costumed docents  and the museum’s living areas will be
decorated in the style of the periods that they depict. The museum’s second floor features a living room, dining room kitchen and bedroom all furnished as they might have been back in the 1800’s, along with displays of the toys of that era and lots of photos of Milford in the 1800s.

In addition to the sights to see, there will be old time caroling and treats to taste from the Victorian era (all freshly made of course).  A cookbook that contains the recipes for many of the treats and more will also be on sale. There are picture books, T-shirts and other items for sale in the Museum store.

So, come share a bit of Milford’s history, be entertained and have a snack while you shop or take the tour of the upper floor.  If you’ve never been to the Museum, this is a perfect opportunity. Admission is free, although we do request that you make a donation to the Museum, if you are able.