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Friday, February 28, 2014

I've made an offer. What now?

OK, I've made an offer - signed the Purchase Agreement and given my Realtor my earnest money check. What comes next?

This is part 5 of a 10 part series of FAQ questions and answers about the real estate process from the buyers’ perspective.

Answer - Your Realtor will transmit your offer to the listing agent for presentation to the seller. In some places your agent may request the opportunity to actually present the offer to the seller; although that doesn't happen much anymore here in Michigan.  On most offers there will be a deadline for a response; however, if you have made an offer on a foreclosed house or a short sale, don’t worry too much about that deadline - the other side will answer when they damned well feel like it. Get used to that in a distressed sale.
One of several possible things will happen after the listing agent gets the offer.

Your offer may be accepted as it, in which case you can move on to the next post in this series.
The seller may reject your offer, but make a counter offer. In this case your agent will arrange to sit with you
again to go over the counter-offer and give you his/her advice. The counter offer is most often made by just scratching out words and/or numbers on your offer and the seller writing in what is acceptable to him/her. This most often occurs when the original offer was very close to what the seller will take, so he/she changes the dollar amount on the Offer form, or to deal with a difference in a term or condition, such as occupancy. It could also revolve around something that you asked for that the seller is not willing to give, such as an appliance.

The seller may return a form called a Sellers’ Expression of Intent. This is a form of rejection of your offer that keeps the process alive. The sellers are basically saying “I do not accept your offer; however, if you were to return with an offer that contains these changes (they will list their requirements) I would favorably consider that offer.” Sellers sometimes use this method because it does not tie their hands from looking at other offers (after all they've expressly stated that they are not accepting your initial offer). You agent will have to start over with a new Purchase Offer form, but at least they have expressed interest in continuing to negotiate with you. Try again with the changes that they have asked for (or at least all that you can agree to do) in their reply.

The seller may just reject your offer with no counter-offer. The seller is not really required to make any counter-offer. An outright rejection often happens when the original offer was a "low-ball" offer or had some conditions that the seller doesn't want to consider, such as a contingent offer (an offer that is "contingent" upon the sale of the purchaser's current home prior to the finalization and closing of the house being offered upon). If the seller rejects the offer, without a counter-offer, then you would need to start all over with another offer, if you still want the house. At that point you would get your earnest money back, until such time that you make another offer. If you plan on making another offer fairly quickly, just leave your earnest money in escrow and apply it against the next offer.

If your offer elicits a counteroffer of any sort, you will likely become involved in negotiations at this point, so here’s an interesting article from Realtor Magazine on how  to negotiate without being a jerk.  I’ve certainly been involved in negotiations on both sides where one of the parties was being a jerk about it and it’s not fun nor is it productive. The other things that I've seen over time is that deals worth hundreds of thousands of dollars can, and do, fall apart over issues or items that are worth only a few hundred dollars. You must keep things in perspective during this negotiating process.

Keep in mind during these negotiations that the seller has effectively taken his property off the market while he/she dickers with you. The seller is not going to want to keep the home off the market for long. That works
for and against you – the seller will want to get to a decision quickly (good for you), but he/she will also not want to screw around with someone who doesn't seem serious enough to get to a conclusion quickly. The message here is “don’t play games – you’ll lose.”

If the seller rejects your counter to their counter-offer, be prepared to move on. They've had it with you for now and may not even entertain future offers from you. You’ll have to start over with a new offer. At that point it’s time to reassess whether you really want this house. If your answer is “yes”, then it’s time to stop screwing around and make an acceptable bid – you already know what the seller wants.

If you made a bid on a foreclosed house or a short sale, be prepared for a counteroffer from the bank that is essentially a new offer from them with their terms and conditions. You’ll need to go over that counter-offer with your agent. You need to be careful to understand all of the terms and conditions in the bank’s counter-offer, because some of them may have penalties if you don’t meet their deadline for closing and there may be other terms and conditions that are not advantageous to you. Many banks are now requiring the buyer to pay some of the costs that the seller used to pay, like state taxes and fees. Some are even refusing to pay back property taxes and requiring the buyers to bring those taxes up to date.

Make sure that you understand any and all extra costs involved with buying that foreclosed house, so that you can evaluate whether the house is still a good deal. Also remember that the banks are not required to supply any information about the condition of the house, such as Seller’s Disclosures. They are still required to give you some form of Lead-based Paint Disclosure.

If this is a short sale, you might as well settle in for the long haul. Lenders are still taking 5-6 months to get through the short-sale process and you may be required to update your loan application before this thing even gets a decision. It is up to you to decide whether you want to spend the money up front for a home inspection or wait until the bank approves the short sale. Some banks may require that you do the home inspection and the appraisal at the start of the process, which means that you could have around $1,000 sunk into the house before you even find out if the bank will approved the short sale.

Thursday, February 27, 2014

I’ve found a house that I really like and I’d like to make an offer. What do I need to know?

Part 4 of a ten part series of post on the real estate process.  I’m ready to make an offer. What happens now?
Answer - If you have settled upon a house that you think you would like to make an offer upon, inform your doesn’t quite happen the way it portrayed on television on shows like House Hunters and The Property Brothers. There’s a little more to it that you see on TV. It also takes a little more time than they portray.
agent. This is where your Realtor does some of his/her most critical work. It

It might be a mistake to eagerly head back to the Realtor’s office after seeing the house that you want and trying to do all of the necessary work on the fly, so that you can make an immediate offer. It can be (and has been) done, but doing so in such haste can also lead to mistakes or costly errors. If you try to do that, figure on a good hour or two at the office.  After the showing of the house that you want to bid upon have a good discussion with your Realtor at the house or back at the office; so that he/she can go over all of the things that you can accomplish at that point and help you make a list of things that may need to be quickly done by you or by him.

If he/she hasn’t already done so, they will do a quick Comparative Market Analysis (CMA) on the property and come up with a fair offer price. The agent will also procure the Seller’s Disclosure Statement for you to review, if you have not already seen it, and let you look at the disclosures that the seller is making about the house. Sellers are required to truthfully list disclosure about anything that might materially affect the value of the house, such as known water damage or flooding, any known insect infestation that required remediation, any mold problems that required remediation and information in many other categories. There is also a section in the Sellers Disclosure that asks him/her to state the condition of the house and the major systems in the house, such as the furnace and water heater. The Seller's Disclosure is a legal document, which provides the buyer legal remedies (including a complete refund on the deal) if it is proven later that the seller made false statements on the Seller’s Disclosures document.

Your Realtor will also check to see if there is a Home Owner Association (HOA) and ask to see the Master Deed and By-Laws. For information on what to look for in the HOA By-Laws, check out this Realty Times article on HOA CC & R’s. Don’t worry if you can’t get this done before making the offer. You will usually be given time after the offer is accepted to review the Master Deed and By-Laws in detail. Ask your agent to make sure that there are provisions for that review in the offer and for you to back out if they turn out to be onerous.

Hopefully by now both you and your Realtor know how you are planning to finance the purchase – Conventional, FHA, VA, USDA or other. That will influence which Addendums might need to be added to the Purchase Agreement (PA). The agent will also need a copy of the Mortgage Pre-Approval letter that you
have from your mortgage person, if you haven’t already given them one. If you didn’t do so already, go over with your agent all of the things  on the MLS sheet while at the showing; so that you and the agent will know what appliances are offered with the property, in case you want to ask for others that might not be offered , That will need to be on the PA, too. The agent will know from the MLS sheet whether the property is on a well and septic system (possibly another Addendum covering well and septic inspections); whether the seller has offered a Home Warranty or not (something else that needs to be specified on the PA); whether the seller has asked for occupancy after closing or not; and other factors that he will need to know, in order to properly fill out the Purchase Agreement. He/she may ask you about those issues, explain the options that are available to you and ask how you want them handled. The agent will also need to know how quickly you would like to try to get into the property, although the process timeline is dictated as much by the mortgage process as anything these days. He will also ask you want kind of deadline for a response you wish to put in the PA.

If you haven't already done so, you should think about or research the other neighborhood factors that may still influence you - location of nearest shopping and eating facilities, location (and reputation) of the nearest schools, location of churches, and any other factors that could cause you to reconsider the area. This homework should be done with all possible haste, since you don't want to lose the house that you want just because you took too long to make up your mind(s). Use Goggle Local to help find most of this information.
That all sounds like a lot of things that need to get done; but, you and your agent should be able to get all of those things done at the showing, at the meeting right after the showing, or easily within a day.

Next your Realtor should sit with you and go over the Purchase Agreement form with you. He may have it on paper or just use the electronic documents that he intends to send you for your electronic signatures.  He/she should explain all of the paragraphs on the form and get the necessary information from you in order to fill out your offer for the property. He/she will also go over any Addendums that will accompany the Offer and suggested wording on them. He will need your input on choices that might be on the Addendums.
There will come a moment during this process of filling out the Purchase Agreement when you will need to make a final decision on an offer price. Obviously you will have discussed this with your Realtor and with your mortgage agent. Your Realtor will tell you what his/her research says the current market value is for the property. Your mortgage agent will tell you what you can afford and what help you might need in the form of Seller Concessions to help pay for your closing costs.

In pre-Recession days well-priced homes would sell on average for 97% of asking price. That went out the window during the Great recession and buyers started low-baling and offering only around 90% of asking price and asking for Seller Concessions on every deal. Those days are over, too. In the current tight-inventory market (a Seller’s Market) offers are again at or sometimes above asking and bidding wars between buyers for good houses are not uncommon. Certainly, it is not the time to low-ball; especially if you will need a Seller’s Concessions to help with closing costs. In the current market environment, asking for Seller’s Concessions can be a deal killer, especially iof you’ve also discounted the asking price a little. My best advice here is to listen to your Realtor’s advice.

Your Realtor will make sure that all the proper fields are filled in correctly on the Purchase Agreement and any Addendum and have you sign and initial the forms in the proper places or mark them for later electronic
signatures. He/she will also make sure that you have signed and dated the Real Estate Agency form, the Seller's Disclosure form, the seller's Lead-Based Paint form and any other forms that need to accompany the Offer. If you’re using paper copies, he will and make a copy of all of the documents that you have signed. In most cases these days the Realtor will either use an electronically signed document for you and the seller(s) to sign or scan in the paper document and use email to transmit it. The old days of hand delivering paper document or even using FAXs is pretty much over. Apps like DocuSign and other electronic signature apps are making the process largely paperless.

Whether it’s on paper or electronic, it is still your responsibility to read through the Purchase Agreement (or Offer to Purchase Real Esate) thoroughly and ask questions about anything that you don’t understand. THIS IS A CONTRACT! It is a contract between you and the seller. The agents involved in the sale are not parties to the contract nor are they liable for the provisions of the contract. Read it carefully before you sign. Your agent should point out that you have the right of the contract to a review by a lawyer.

Your agent will also have you make out a check for what is called "Earnest Money Deposit (EMD)"; which will be held in the buyer agent’s company escrow account and applied against the sale at the time of closing. The earnest money is also what you are putting at risk to get the seller to accept your offer and take his/her house off the market. If you change your mind about buying the house after the seller has accepted your offer, you could lose the earnest money to the seller depending upon the circumstances that lead you to make that mind change. In the time before the great real estate bubble burst and before the Great Recession an EMD of 3% was normal; then it dropped down to $500 or $1,000 during the time of high distressed property sales. It is headed back to the traditional 3% level; so don’t be surprised if the Realtor asks for a check for 3% of the sale price. In Michigan the brokers are required to deposit that check within 48 hours of receipt, so make sure that the money is in the account.

There are still several things to come in the process that could impact the sale price and drive it down some – the appraisal and the home inspection. Your goal at this point should be to get a signed agreement with the seller and then go from there. That will be the next installment in this series – OK, I signed the contract and gave my EMD; what comes next?

Monday, February 24, 2014

OK, I’ve got a short list of homes that I want to visit. What’s next?

This is the third in a series of ten posts that have been taken from a section of my web site – that answer Frequently Asked Questions (FAQ) of buyers.

Answer - Let your Realtor set up appointments for you at each of the houses. If you haven't had a good chance to see the house and neighborhood in the daytime, I recommend going during the day, probably on a weekend. Remember to take your HUD criteria worksheet, so that you can take notes for comparing houses that you’ve visited later. It can all turn into a blur in your memory if you visit more than three houses.

Here are some tips for the actual visits:

If the house is not in the best shape when you visit; you need to be able to look beyond what you see when d up or if the clutter was gone. It is amazing the condition that some people leave their houses in for showings, but It happens, so you have to learn to deal with it. You also need to look beyond the current decorating scheme and "see" the house as you would decorate/paint/wall paper it.
you visit some homes and envision how the house would look if it were cleane
  • You should be looking for the condition of the house. Does the structure look and feel sound? Are the walls and doorways and windows straight? Is the floor level or is it slanted or "bouncy"? Is there significant damage that would need to be repaired? Would the carpeting or other floor covering need to be replaced right away? Is there visual or smell evidence of mold? Is there any visual evidence of infestation by bugs or critters? Is there evidence of water damage on the walls, ceiling and around or under sinks and tubs? Have major systems been updated – electrical, heating/cooling, water heater, sump pump, water pump, etc.? Do light switches work? Does the roof have missing or warped shingles?
  • Does the house meet my criteria? Are the rooms large enough for my furniture or for what furniture I'd like to have (you can't put a King-sized bed in a little 10' X 10" bedroom and expect to have room to walk around)? Is the layout of the house OK and the flow through the rooms? Does it have the basement or garage or other features that I thought were important? Is the yard OK for me? How about the neighborhood and the immediate neighbors?
  • Read all of the information that is available about the house. Most houses that are listed will have some form of information packet in them when you visit. That information normally would include all of the room measurements, any updated features of the house, a list of appliances (if any) that are staying with the house, the name of the school systems that the house is in and other important information, including the price.
  • Take lots of notes, so that you can compare houses later. It can get confusing real quick and houses will start to run together in your memory.
  • If the house has any Sellers Concessions or Subsidies mentioned in the listing or in documents at the house, make sure that your Realtor explains those to you and how they might affect what you end up paying for the house or for your mortgage.

If other factors, such as the rating of the school district and the specific schools that you children may end up attending are important factors to you; it is really up to you to do the in-depth research. Your Realtor will know something about those factors, but he/she can’t be an expert on all of the schools in all of the neighborhoods that you may visit. In my area you can find links to sites that rate school districts and schools, as well as maps of where your children would go on my web sites. 

Now that’s you’ve moved into the showing stage of your new home hunt, your new watchwords should be patience and persistence – you’ll likely need both. In a tight market, like that which we are current seeing, with very low inventory; it may take longer to find the house that you had in mind to be your new home. Having a patient and understanding Realtor is critical at this stage. If you have an agent whom you feel is “pushing you” to make offers on homes that you really aren’t that thrilled about, get a new agent. That agent is only thinking about his/her commission and not about your well- being.

This is also the time, if you have not already done it, to ask your mortgage agent to put together a mortgage
pre-approval letter for you; so that you are ready in case you want to make an offer. The mortgage rep can put together a letter that states that you are pre-approved up to a certain dollar figure. That letter can be fine-tuned or changed later, if needed. If you mortgage rep blows off this request and tells you to wait until you have a specific house in mind that is not necessarily enough to say get another mortgage rep, but it may be an indicator that this rep is either too busy or unconcerned about your loan and could be a problem later. It may also tell you that the mortgage rep really hasn’t done any work yet to get you pre-approved.

Making visits to homes is an activity that must be seasonally adjusted for weather conditions. In Michigan you may have to slough through snow drifts to get into some houses and many homeowners will ask you to remove your boots while in the house, so be ready with clothing and boots that fit the conditions.

Saturday, February 22, 2014

Question - OK, I'm ready to start looking for a house , what now?

This is the 2nd in a series of ten FAQ questions and answers for real estate buyers.

Answer – If you didn’t do this in step one - get a good real estate agent (or agent team) to help you. Remember that you pay nothing directly for this support. The real estate agent makes his/her commission off the seller at closing. Some agencies charge an administrative fee for work that the agent did for you during the search, but that is usually not collected until you close on a house and is normally only a couple hundred dollars – which is nothing in the big scheme of things. Other than driving some neighborhoods to get a feel for them and for driving distances, it's a waste of time for you to drive around looking for signs in front of houses. (CLICK HERE FOR MORE ON WHY TO USE A REALTOR®)

Let your agent do the MLS (The Multi-List Service that real estate professional use) searches for you. In Michigan, your agent should take the time to go over an explanation of the forms of Real Estate Agency with you and have you sign the form that indicates that he/she has done so. The agency form is not a contract; it's just a form that states that you have been informed about agency. This is not only a good practice; Michigan Real Estate licensing law requires it. Make sure that your agent is a Realtor, which is a designation for a member of the National Association of Realtors and which means that the agent has agreed to do business following the Code of Ethics of that Association. To read more about the concept of Agency, click here.

Use the power of the Web! Statistics tell us that 89% of people looking for a house see it first on the Web. There are several very good search sites - in this area good sites to start with are , , and ; or in Michigan in general at , . Outside of Michigan , and national sites like Zillow and Trulia might work best for you. These Web sites can't replace the work done by a good agent and some can run anywhere from days to weeks behind the MLS that your agent will use. They do provide a good way for you to look at houses in the areas and price ranges that you may have in mind. The Real Estate One site has a nice map-based search feature that you might want to try.

In today's mobile-oriented world it is also a good idea to download a good interactive real estate app on your smartphone. Two of the best that I know of are the Real Estate One App and the app, mainly because they work off data that is kept up to date. Here’s a link to a video about the Real Estate One app. Certainly, you can also get mobile apps from Zillow and Turlia. Most mobile apps are location aware and interactive, which lets you see what is actively for sale in the area around your current location. There are also tons of real estate booklets around. Most of them are weeks to months out of date and most don't have any of the critical information in them; but, they are fun to read over a meal and let you get a feel for different style of houses.

If you have time, when you get a list from the Web or from your Realtor, drive by all of them and make notes about the neighborhoods and anything that you notice from the outside that you may need to ask your agent to look into for you. Just doing drive-byes will eliminate a number of houses that might have looked good on the Web or on paper. You may also want to get report cards for the school districts that you would be in and get profiles of the communities. You can find links to research site about school and community profiles on my site –

If you see a house that you want to visit, call your agent and have him/her arrange for the visit. Remember that your Realtor can represent your interests in any house, even those that are "For Sale By Owner." If you should decide to stop by an Open House that you may see, let the agent that is in the house know that you are already working with a buyer's agent and that they will be representing you on any offer made on that house. 

If you're out driving around and see an Open House that yo want to stop at, keep in mind that the agent at the open house represents the Seller and not you, so be cautious about what information you share with that agent. Anything that you tell that agent the Seller will end up knowing and that could put you at a disadvantage in later negotiations.  Remember to bring along the House buying checklist form that I recommended in the first installment. Visiting multiple houses can get confusing very fast unless you have some way to take notes and make comparisons later.

Thursday, February 20, 2014

Why Milford for Generation “Y”?

I’ve been reading a lot lately about the tastes and preferences of the so-call Gen “Y”, Aka the Millennials. Many articles contain the same characteristics of what they are looking for when they are looking for a new home:

1.    Something smaller and less pretentious – Gen “Y-ers” are not your typical McMansion buyer.
2.    Green, energy efficient homes, whether through design or updates.
3.    Homes with some character – older, small homes, like bungalows
4.    Homes in walkable areas – they would prefer to be able to  walk to the restaurant or store
5.    Areas that are culturally diverse and/or which offer a rich cultural environment
6.    Areas with things going on – availability of both indoor and outdoor activities
7.    Areas with a friendly and welcoming sense of neighborhood
8.    Areas with strong local commitment to giving back

As I thought about it, it became clear that the Village of Milford meets most of those needs. We certainly have our share of McMansions, although most are around the periphery of the Village and most are not really on small lots. While many of the available houses in the Village were built years ago, most have been updated with newer windows and insulation. Most of the smaller and much more affordable homes in the Village were built in the 50’s and 60’s. The small homes built in the 50’s and 60’s almost all have hardwood floors and there are plaster walls and coved ceilings in the 50’s built houses. Most of these homes are in the 900 – 1,100 Sq Ft range, with three bedrooms. Some have finished basements and many, but not all have detached garages. It’s also nice that, if you live within the Village; you will be on city water and septic, both owned and operated by the Village

The Village of Milford is one of the most walkable towns in the area. You can check that out at Milford has some of the best area restaurants and a downtown that still has stores where you can buy things that you really need and not just antiques or knick-knacks. The sidewalk system in the Village encourages walking and for many events, especially those held downtown or in Central Park, most people actually walk to them. There are three major parades a year that Villagers can walk downtown to see, as well as several minor parades( the little leagues parade of teams and the homecoming parade to name two)and events that close off Main Street – the biggie is our Milford Memories Street Fair in August every year.

The Village is more culturally diverse than most people realize and offers art, music and other cultural programs through groups like the Township Parks and Rec board, the Huron Valley Council for the Arts, the Village Fine Arts Association and the Milford Historical Society. There are concert series and artists showing going on every month. In the summer there are concerts in Central Park and 2-3 movies in the park, too, for the kids. We even have a great little movie house, right here in the Village.

Indoor and outdoor activities are abundant with organizations like Kensington Metro Park, The Carl’s Family YMCA, the Milford Library and Huron Valley Adult Education and Recreation offering activities throughout the year. Go to my web site for a complete rundown on all of the activities and events in the area.

There are parks to visit (one with a huge play structure) and waterfalls to see. There’s a historic Powerhouse to see and visit that was designed by Albert Khan and a home in the Village that was owned and lived in by a Hollywood and TV actress (Mary Jackson, one of the Baldwin sisters on the Walton’s Mountain TV show). There’s a river that runs through it with active canoe and kayaking groups and bike trails that run all the way out to Kensington Metropark. There are mountain biking trails nearby and an active mountain bike club. There’s even an annual Crit held in Milford for those into bicycle racing.

Finally there’s the sense of neighborhood that is unavoidable in the Village. People identify with their own sub or neighborhood, but everybody in the Village identifies with being a Milfordite. Milford is a place that people are proud to invite their friends and family to visit. Every year in September the Historical Society conducts the Milford Home Tour so that 4-5 Milford homeowners can share their homes with the world.

Milford also has many very active local groups and clubs dedicating themselves to giving back to the community and to the area at large. The Milford Chamber of Commerce is one of the strongest and most active in this part of Michigan and is a key player, along with the Milford Rotary Club, in the push to build an amphitheater in Central Park as a new venue for concerts and other activities. The HVCC is also the presenter of Milford Memories and the annual Christmas Parade (one of the three big parades). The Downtown Merchants Association sponsors several shopping oriented events during the year, including two “Ladies Night Out” events.

The Carl’s Family YMCA has programs for all ages and runs summer outdoor activities for children, too. The Huron Valley School District has the Adult Education and Recreation program which runs year around programs for the whole family. The local VFW post is quite active and is the presenter of the annual Memorial Day Parade (another of the three big parades). The Milford Historical Society runs the Milford Historical Museum on Commerce Rd (just a block from downtown) and is the presenter of the final of the big three parades – the 4th of July Parade. There’s also a strong Optimist Club in the area, as well as a KofC club, a Zonta chapter and the Milford Garden Club. Finally, there’s a strong base of churches in the community, with 6 right in the Village and more just outside. There are always church-sponsored events going on or events by other groups being held at the churches.

One of the primary local charities – Community Sharing – offers unique services and food help to area residents who are in need and well as running the states only pet food pantry to provide for the pets of family who may not be able to afford to feed them right now. People in the Village of Milford also strongly support Meals On Wheels and the Special Olympics (Milford has its own team that competes in SO events).

When I sum all of that up, I can honestly ask - why would you not want to live in such a great community? 

Wednesday, February 19, 2014

What should I do before I start looking for a new home?

This is the first in a series of 10 posts here that will explore some of the most frequently asked questions that I get as a Realtor from the buyers that I work with.

Answer - Probably the most important things to do before you start looking are the following:

Get a good Realtor! The hunt for a new home can be a huge time waster if you don’t have the insight, knowledge and skills of a good Realtor working for you. Yes, there is a lot of information available on-line these days – essentially the same information that used to be available only through a Realtor. However, just amassing a ton of data or listings is next to useless, unless you have help interpreting it and applying the filter of understanding the market and the local area to that mound of MLS sheets. There are many good articles that have been written about the importance of having a Realtor to help as your Buyers’ Agent.  Click here to read one of them.

Get a realistic idea of what you can afford. Do this by either sitting with your financial advisor (if you have one) or sitting with a representative of a reputable mortgage lender. I do not advise that you use an on-line mortgage company for your first home buying experience, mainly because you don’t have an opportunity to sit and meet with the representative. I know that they will feel that a phone call can accomplish the same thing, but my experience has been that face-to-face time with your rep is important.

I generally also recommend that you stick with direct mortgage lenders, rather than mortgage brokers, if this is your first home buy.  Direct mortgage lenders and reputable mortgage brokers have their own sources of money and while some may tend to be a bit conservative in their lending practices, that conservatism will help keep you out of trouble, too. Mortgage brokers will shop you around to various money sources, which can get you a better rate sometimes, but can also hold things up.

You may also want to better understand down payment assistance programs, especially if you are a first time buyer. Ask your mortgage person to explain programs like MISHDA that are available in MIchigan and programs under the VA and USDA, which may provide 100% financing.

Establish a search area where you feel you would like to live and which has a reasonable drive time to your work place(s). I recommend that you try the drive out in the morning and again at night at least once to see what kinds of traffic patterns you might have to deal with and to get a feel for your potential drive time. Here’s a good article to read from the that may help you with establishing the criteria for a neighborhood. Don’t completely shut out that neighborhood that is just outside of your preferred area, especially if your Realtor feels that it offers everything that you are seeking.

Create a realistic set of criteria for your real estate agent to use in the search. If you are in the $100-200K range for your first home, it is not realistic to expect to find a big house with lots of land and features like walk-in closets and a Jacuzzi tub in the master suite bathroom. As Dr. Phil might say - Get Real! Here’s a link to a good Home Buyer’s Checklist from HUD that might help you.

It’s OK to specify things like number of bedrooms and baths preferred, basement or no basement, garage (1-2 car), style (ranch, colonial, Cape Cod) and, of course, the price range. In general, older and smaller homes (normally ranches and tri-/quad-levels) will fit the criteria in the $100 - 200K price range. Your real estate agent can help with that too. You may also want to understand some of the different types of properties, other than the traditional subdivision homes, that you could look at, such as Condos, Dethatched Condos, Site-Condos and Co-ops. Here’s a page on my Milford Team  site to explain some of those.

Set aside some time to do drive-bys and to look at homes. While there is a lot of spur-of-the-moment in real estate, your searching will go better if you discipline yourself to set some specific times aside for driving by prospective homes and for going on visits with your Realtor. Your Relator will usually need enough advanced notice to be able to set up the appointments, and that can vary, but try to give him/her a days advance d notice.

Doing drive-bys, maybe after work, can help eliminate a lot of places that sound and look great in the MLS listing; but turn out to be places where you wouldn’t want to live. You can tell a lot from the curb and if it doesn’t appeal to you from there, there is usually little reason to believe that it’s going to turn out much better when you get inside.

If you are a couple, try to get on the same page about what you want in a house. Your Realtor will be able to figure out any differences fairly quickly, but it can waste time if he/she is recommending or showing you houses that only one of the two of you will like.

Once you’ve got yourself all organized and have a working relationship going with your Realtor, you are ready to start looking.

Thursday, February 13, 2014

February Market Update

From our broker - Dan Elsea

The biggest influence on real estate so far this year has been the weather, not the economy (which has fortunately remained stable). The snow and cold have put a significant damper on customer and showing appointments. The good news is that values continued to rise, in many cases over 10%, and the number of homes under contract remained very close to January of last year. The most positive indicator is the number of visitors and information requests to our website, which remains at 2013 levels, even though showing appointments have been off 35% compared to January/February 2013. Buyer interest remains strong, but they simply cannot get to the properties to make an offer. There is about a 30-day lag before showing appointments turn into contracts written, so we expect February sales to be slow compared to last year. Weather related slowdowns rarely cause a permanent reduction in business, it simply pushes sales forward towards the better weather months.

For Sale inventories continued their downward trend, as did the Months Supply of Inventory (MSI), falling to its lowest point (three months) in Southeast Michigan. With 75% of all buyers chasing the newest listings on the market, the MSI for most buyers is under 60 days. There are fewer multiple offers than at the peak of the market frenzy last summer, but it looks like a similar active market may be waiting for us this spring. We can expect a big jump at the first thaw, and moving up from there. We are still expecting more listings to hit the market this year than last, just delayed by the weather. This will make the summer and fall markets fast-paced, but also a little closer to normal.

One way to judge the strength of the market is to compare the trend of sale prices to their original listing prices. In this chart we break out the properties that sold without price reductions versus those that required one or more price reductions to sell. The group without price reductions has held pretty steady in the upper 90’s, spiking to over 98% last summer when the feeding frenzy was the hottest. The group with one or more price reductions has hovered in the mid 80’s, spiking to over 90% during the summer. (Even the not so great listings were selling then!)

Looking at January 2014 sales we see that 65% of all sales were in the category without price reductions and selling on average in 31 days. As you would expect, the remaining listings sold slower and with a bigger discount to asking price. Of the 35% that required price reductions, on average they would need to reduce their asking price by 11% before they would be in the range for any strong offers to be made.

Our January sales were surprisingly strong considering the weather, a little behind last January but still a strong showing, with the average transaction value up to over $165,000. That’s a 24% increase compared to January of 2013.

Saturday, February 8, 2014

Helping the seller through the home inspection process...

You’ve accepted an offer on your house. Great! Now what? 

In my area (Southeastern Michigan), one of the first things that will usually follow the acceptance of an offer is the home inspection. In almost all cases the home inspection will precede the mortgage appraisal.

For many sellers, both the home inspection and the appraisal are “hold your breath and hope” kinds of things. They really don’t have any idea about the things in their home that might be found in an inspection or what the appraiser might consider when doing the appraisal. Nether Inspections or appraisals need to be traumatic and there are things that the homeowner can do to assist in both. I’ll focus upon the home inspection in this post.

For many it’s probably been years since they were the least bit concerned about things on the roof or in the basement; but now they are. Most sellers probably are already aware of many of the small things that will be found; they just never got around to fixing them until now. It’s usually too late to do anything about things that you may have been neglecting for a long time when you get to this point; however, there are things that the seller can do to at least accommodate the processes and perhaps shed a better light upon the house.

Most Realtors will advise the homeowner not to be present while the inspection is going on. That’s good advice. The homeowner has already fulfilled his/her duty of sharing the pertinent information about the property when they filled out the Seller’s Disclosure for the property. If the seller sticks around there is a tendency to follow the inspector around trying to point out all of the good things and trying to explain some of the bad things that he might find. It can really slow the process down and be distracting to the inspector, not to mention perhaps being uncomfortable for the buyer. The home inspection is supposed to be a time when the buyer finds out about the house by having open conversations about what the inspector finds. That is not easy or comfortable to do if the seller is hovering around during the inspection.

Sellers who walk around with the buyer and inspector during the inspection have the opportunity to (the listing agent might say danger of) blurt out even more than was required by the Seller’s Disclosure. Sometimes those unsolicited little extra bits of information about the house can expose something that can queer the deal.  A well-meaning seller who might share an innocent story about the rumors when he/she bought the house that it was haunted. While he/she might laughingly dismiss that rumor, some buyers might not and could be frightened off by even the rumor of a haunting. Stranger things have happened.

There is no way around the fact that a home inspection is a very intrusive event. The inspector needs to go places and do things that you might feel are a bit of an invasion of your privacy and are not comfortable with; but, the inspection is not being done for your comfort, but for the comfort of the buyer. The inspector is not going to look through your chest  of drawers or your medicine cabinet, but he will be going places where no other guest in your house has likely ever been.

So, what should the seller do to get the house ready, so that the inspection goes smoothly? For one, the seller needs to understand the inspection process and what things and areas of the house the inspector needs to have access to, in order to do a thorough inspection. Here are just a few things to be aware of:

Most inspectors will start outside first. If there are areas like crawl spaces that they may
need to access those should be cleared of any obstructions including snow. If there are sheds or other storage areas that may need to be inspected, leave them open or provide keys for the inspection. The inspector will try all exterior faucets unless they are obviously winterized. Make sure that they are all accessible.

The inspector will need to get on the roof (assuming that it is not snow covered) and should be given any instructions needed about where he can and should not place the ladder (think flower beds or other areas that a ladder might damage) to access the roof. Also, if the homeowner is aware of any soft spots on the roof that should be avoided, he should forewarn the inspector. 

Inside, the inspector will need access to all of the attic areas that provide for access. Attic scuttles are often located in closets and the seller should remove all items from the closet that has the scuttle in the ceiling. It is likely that some insulation will fall out of the scuttle when it is opened and they don’t want that getting all over their stuff. If there is more than one scuttle, the sellers will need to clear them all for access and to avoid getting insulation droppings on their personal items. If the scuttles are sealed, the inspector will need to cut that seal and it is the seller’s responsibility to reseal it, not the inspector.

A good inspector will test to see if all of the functions of the appliances that are staying with the house are working. That will mean cycling the dishwasher all the way through and running all of the burners and oven of the stove. For the homeowner that means making sure that the oven is unloaded and that the dishwasher is ready with a load of dishes (with detergent), if they want to make use of that cycle.  He/she will run the garbage disposal and test any other appliances that are staying – trash compactor, microwave, etc. If the washer and dryer are staying the inspector may put them through a full cycle too, it test their conditions.

The inspector will also want to fill the bathtub(s) and run it if it is a jetted tub or just fill and drain it if it is a regular soaker tub. Showers will be run also. All of the sinks and other faucets will also be run to test the plumbing for both fill and empty rates. All toilets will be flushed. A secondary reason for all of this water being run is to test the septic system, if the house is on a septic, to see how it handles a big water load.

The inspector will need to run the furnace and the air conditioning (assuming that the
weather permits) and will measure for efficiency of both. He will also pull the furnace filter to check its condition and open the humidifier to see if it has build-ups of deposits. The furnace heat exchanger will be tested for any evidence of carbon monoxide, which would indicate a cracked heat exchanger that is letting in combustion gases to be circulated into the house (a bad thing). The seller should make sure that there is ready access to the furnace on all asides. The inspector will also look at the hot water heater and may test its pressure relief value and its drain faucet. Make sure that he can get to those, too. He will also test all of the joints on the gas piping leading to the furnace and water heater for any leaks.  If there is a water softener the inspector may cycle it to test that it is operating properly, so make sure that there is salt in the softener salt tank. If the house is on a well the inspector will test the pressure tank and force the well to cycle a few times by running water in the house (that’s another reason why all of those tubs and sinks were being filled).

The inspector will survey the walls and ceilings from the basement to the top floor, looking for any evidence of water intrusion. If the seller knows about something that will show up, he should share that information and what was done about the leak that caused the damage. A short written explanation can save everyone lots of time. Basement walls and floors may have cracks in them and the inspector will try to determine if they are normal settling cracks or an indication of foundation issues and if there are any accompanying water intrusion issues.

The inspector will be opening the electrical panel to look at the wiring. He will be looking
for any circuit breakers that have been doubled up (two sets of circuit wires run to a single breaker), any mismatched breakers with wire sizes that are not correct for the break amperage and in general how the box is wired (Professionally or DIY), as well as checking for any overloaded circuits, usually with a thermal hot spot detector.  The inspector will have also been looking for Ground Fault Circuit Interrupter (GFCI) plugs or circuits where they are required, in the kitchen, baths, basement and garage. If there are circuits that are protected by GFCI breakers in the circuit box the homeowner should label those both in the box and at the outlets.

Some other tips or advice – 
  • Leave notes or write-ups about anything that you feel may need to be explained –a water spot on the ceiling, missing or cracked wall or floor tiles or a mismatched door or cover on an appliance.
  • Leave out any owner’s manuals that you thing might be helpful for eh inspector 
  • Take your pets with you (or cage them) when you leave, unless they are fish or birds.
  • If there have been recent repairs or replacement of any major items (roof, windows, furnace, water heater, etc.) in the last few years, leave out paperwork and a note for those, too.

Understand that the inspector will be trying his best not to make any messes or to break anything, but things can happen during the process. Most inspectors are insured and bonded; however, they are not responsible for accidents that happen during the inspection. Accidental damage would have to be covered under the home owner’s home insurance policy. The inspector will try to leave things as he found them, but sometimes something will not be reset to the original state. Don’t get upset. It’s just part of the process that you need to get through in order to sell the house. Just deal with it and move on.

In general, Purchase Agreements are written with provisions for feedback about anything that is found to be unsatisfactory from the inspection to be transmitted to the seller in writing within 1-2 days. The key with that is not to get offended or defensive. The inspector didn’t make those things up. They exist and need to be dealt with. I some cases the inspector will probably be pointing out things that are dangerous to the seller’s family as well and that of the buyer, such as missing switch or plug plates, bare or dangling wires or maybe a stairway without a handrail; so, the inspector should be thanked and not denigrated for reporting those items. 

If there are no big, show-stopper issues reported that cause the buyer to want to back out, everything else is negotiable; so, the seller should be prepared to negotiate with the buyer on which items they will fix and which items they’d rather not deal with and might want to cover with an offer of a sale price concession. Any negotiation that affects the sale price should take place, if possible, before the appraisal, since it will lower the sale price and may make it easier for the house to appraise at the sale price.