What business is it of theirs?

In the real estate business we often hit cases where a buyer may need to tap into the Bank

of Mom and Dad or perhaps another relative.  Many times these transactions take place in secret, without the buyer informing his mortgage company. The common attitude is, “What business is it of theirs if I get some help from mom and dad?” Unfortunately, it is their business and they will discover it anyway when they look at the detailed bank statements that the underwriter will ask to see perhaps going back as long as six months or more.

Why is that their business? Well there are a couple of reasons that mortgage underwriters look to see where the money is coming from in a real estate sale. One reason is an unfortunate sign of our times and that is that real estate sales have often been used by drug dealers to launder their ill-gotten gains. Any large sums (and not that large to attract attention) that flow into the buyers account in the last six months will be questioned and documentation demanded for the source of those funds. If you sold something else, maybe

even another property, and the money came from that, you will need to document that sale.

Perhaps the money is coming from parents or relatives. That’s not illegal or necessarily bad, if it is a gift; however, the underwriter is going to want proof that it is a gift and not a loan, which would count against your debt to income ratio. You will be asked to provide a letter from the person giving you the money that states that it is a gift with no expectation of it ever being paid back.  If there is any expectation that you’ll pay it back “once you get on your feet”, it will be treated like a loan and probably screw up your debt to income ratio and could cost you the mortgage.

I’ve also seen buyers go out and spend money for things like furniture for the new place or maybe even a new car after they’ve been pre-qualified, but before the underwriting is done. They also think, what business is it of theirs if I buy furniture or a car. What does that have to do with the house mortgage? Any new and big expenditures like those will also impact your debt to income ratio and could screw up the mortgage process.

The bottom line is that once you apply for a mortgage, your life becomes an open book, at

least to the mortgage underwriter. He/she is going to want to know everything about your and your finances. The amount of detail that the underwriter may ask for and the depth to which he will probe may surprise and even annoy you; however, he is trying to learn enough about you very quickly to make a call for the bank on whether or not you are a good credit risk and will be able to repay the loan. You might not be able to repay it if you are in jail because it was drug money  or if you also have to repay that relative who so kindly “loaned” you that money for your down payment.

So, it really is their business and they are usually very good at it, so don’t think you are going to outsmart them with a wink and a nod to your parents about their “gift”. The penalties for fraud, which is what that would be, are quite stiff and could even land you in jail right next to that drug dealer.

Dealing with fixtures…

One of the areas in real estate transactions that cause quite a few disagreements between buyers and sellers is the concept of what is a fixture that goes with the real estate, vs. personal property that the sellers may remove and take with them. Many Realtor® and most lay people involved with the sale of real estate understand (or think that they do)  things like refrigerators and stoves and other items that are obviously considered to be personal property and not a part of the real estate that is being sold. However, there are lots of things that are not as cut and dried, because they may fall under the legal concept being  a fixture in real estate terms.

We recently had a Continuing Education class on this topic at our office that was conducted by Donald Rump, Chief Council for our Capital Title Insurance Agency subsidiary. Real Estate One does a lot of Continuing Ed classes at its branch office to keep its agents up to date on the changing world of real estate. Don is a Vice-President and the chief litigator for Capital Title and has a career in real estate law that spans over 30 years. He’s also an entertaining speaker on what might otherwise be a very dry topic.

All Purchase Agreements have some standard boiler-plate language about the fact that all of the normal stuff that one might expect would go with the house actually does go with the house. We have a fancy term for most of that called appurtenances. WikiPedia defines the term this way -  Appurtenances are things that belong to and go with something else, the appurtenance being less significant than what it belongs to. In the case of real estate the appurtenances belong with the realty or property. Fixtures would be considered to be appurtenances; however the devil is in the details of how a fixture is defined. That definition is what Don spent his time on helping us to understand.

How one determines whether something is a fixture and becomes an appurtenance to the real estate is determined  by a combination of law from court cases and the facts in each instance. Since not every possible situation has been litigated, the courts have established over time a set of three guidelines or tests that may be applied to try to determine if an item is a fixture prior to having to litigate the matter.  Don went over the three tests that courts would use and apply to determine whether an item is a fixture or not.

The three tests are:

Annexation – This is the test that looks at whether or not the item is attached (i.e. it has been annexed onto the real estate). Annexation further breaks down in the Actual or Constructive, with actual annexation covering those cases where the items have been physically added to the property through attachment or securing them to the real estate. If it is screwed, nailed, tacked or glued to the real estate the court would likely find it to be a fixture.  Court cases have established under this principal that carpeting in a property is a fixture. In another instance a wall-mounted Flat screen TV might not be considered to be a fixture.  Keep reading to find out why. Constructive Annexation most often deals with situations where smaller pieces of land may have been added to a larger piece to create an even larger parcel.

Adaptation – This is the test that looks at whether the item was adapted to become a part of the real estate or perhaps the real estate adapted to accommodate the item. A case in point may be found in the creation of a home theater room, where the room may have been modified to fit the home theater projection equipment and the equipment integrated into the room design. Court cases in foreclosure disputes have found that the equipment becomes fixtures within that room and property. If you had to modify the property to accommodate the items it most likely is now a fixture. But keep reading to see why your wall-mounted flat screen is still not a fixture.

Intention – This is perhaps the difficult one for home sellers to understand. It concerns the intention of the homeowner at the time the item was added to the property, not when the owner decides to become a seller and tried to take the item with him. The court will try to decide if it was the intention of the owner that the items be integrated into the property at the time it was added.  

So, you can’t just walk away with your home theater equipment and leave a big empty theater room that you built into the house, with everything missing and large holes or spaces where it used to be

integrated. You can, however, walk away with your wall-mounted TV and even  the mount, if you want it, since it was possible that you did not intend it to be permanently used there and so there was no intention of it being permanent (a fixture). You may still have to repair the holes in the wall where the mount was screwed in, but that’s a different issue between you and the buyer.

The value of understanding these three tests is in not making the mistake of trying to take something out of a property that you are selling that a buyer (and the court) might reasonably believe passes one or more of these tests for whether or not it was a fixture. As a Realtor, It’s my duty to inform seller clients how to avoid getting into a situation that might involve a court having to make a decision based upon those three tests. The best way is to be very detailed and clear about what is staying and what is not in the listing agreement and the MLS advertising. 

If I’m a buyer agent on the deal I tell them to put in the Purchase Agreement anything and everything that you believe should come with the property.  There may be items on their list that the seller intends to take, but that can be clearly and unambiguously established in the negotiations before the deal is finalized. Make no assumptions. Put everything in writing.

Some of the examples that Don used were from commercial sales and involved things like the tools or equipment that make be part and parcel to the property functioning in its commercial role. One example was a bowling alley that was foreclosed and where the owner removed all of the bowling equipment. The owner claimed that the equipment was separate from the real estate and was his property to take and use elsewhere. The courts said, No, the equipment met the test of annexation, adaptation and intent (it was a bowling alley, after all) and thus that equipment became fixtures.

The classic real estate fixture disagreement is about light fixtures, especially large and special chandeliers. It is an easy one to decide but not a decision that the sellers want to here. A light fixture (hint in the name), even a chandelier is a fixture. It certainly passes the first two tests and even though your intention now might be to take it with you, that was likely not your intention when you installed it. I always advise my listing clients,“If you intend to take it, then take it down (or out) now and replace it, so that a buyer will not see it and make any assumptions about it being a part of the property.”

Another common issue that we hit in the residential real estate business involves things like play structures. The key tests there may be whether the legs or posts of the structure sit atop the ground (think about the metal swing sets that you buy and put together yourself) or have been buried (perhaps even cemented in) the ground and whether things like a maybe a wooden border were added around the structure area with perhaps rubber mulch added to provide safe places to fall off the structure – that’s a fixture. An owner would be hard pressed in court to defend a decision to take that structure when he moved. Utility sheds also come up often and the difference may be between  the little plastic shed that you buy at Home Depot and haul home and assemble yourself vs. the shed that you have a concrete pad pored for and then have it built or assembled on that slab. Which do you think passes one of more of the tests for a fixture?

The whole issue of whether something should be considered to be a fixture or not is so dependent on the situation that there is no hard and fast rule, just the tests that the courts have established; and even those are subject to further consideration of the facts of the specific situation. As in all matters that involve legal decisions it is best to consult and attorney if there is doubt. Your Realtor is a good starting point for advice and he/she will suggest that you get legal help if the situation is not clear cut. The three tests that Don outlined provide a good background for you to look at the situation yourself. If you are honest with yourself about those three, you probably won’t have a problem or maybe not create a problem for yourself later.  And remember, when in doubt, put it in writing.

Get the water tested when buying new home

There has been much in the news about water and testing of drinking water ever since the Flint crisis of lead in the drinking water exploded in the news.  It is a good idea to have the home inspector that you hire to do the inspection of the home also perform a water test. You can even do one yourself and for $6, if you live in Oakland County  and some of the other local Counties.  Water test kits are available from the County Health Department. 

Lead isn’t the only potentially bad thing that can show up in your water. In fact, if you are buying a home that has a well and a septic system, lead may be the least of your worries. 

Many homes and subdivisions that were built in rural area were built on land that had once been farms. Farmers use tons and tons of fertilizer on crops, as well as many pesticides and herbicides to control unwanted bugs and weeds. We don’t think about it too much, but many of those farms also had farm animals, sometimes a lot of them, that may have had an impact on the ground water that we are now using for the new homes. Run off from farm animal waste can seep into the water table over time. Both of those things often resulted in increasing the levels of Nitrates and Nitrites in the water that is now drawn from the wells that service those new subdivisions or homes.

You certainly may be forgiven for not knowing what Nitrites and Nitrates are and how they may harm your health. I didn’t know either, before I got into real estate sales and started dealing with home inspections and water tests for wells.   From a Study published by the Water Research Center  comes this information about Nitrates/Nitrogen in the groundwater.

The primary health hazard from drinking water with nitrate-nitrogen occurs when nitrate is transformed to nitrite in the digestive system. The nitrite oxidizes the iron in the hemoglobin of the red blood cells to form methemoglobin, which lacks the oxygen-carrying ability of hemoglobin. This creates the condition known as methemoglobinemia (sometimes referred to as "blue baby syndrome"), in which blood lacks the ability to carry sufficient oxygen to the individual body cells causing the veins and skin to appear blue.   Note - The health concern is primarily related to potential exposure through consumptions by infants.

Adults can tolerate higher levels of nitrate-nitrogen with little or no documented adverse health effects and may be able to drink water with nitrate-nitrogen concentrations considerably greater than the 10 mg/L level with no acute toxicity effects. However, little is known about possible long-term chronic effects of drinking high nitrate water. If your water test indicates a level of nitrate-nitrogen above 10 mg/L and only adults or older children will be drinking it, consult your family physician for a medical recommendation.

To read the entire report got to - http://www.water-research.net/index.php/nitrate

If you find an unacceptable level of Nitrates/Nitrogen in your well water, you may chose to ignore it, if you don’t have small children or babies; however, you may wish to deal with the problem by installing a system to remove the Nitrate. From the same report comes this advice –  Nitrate can be removed from drinking water by three methods: distillation, reverse osmosis, and ion exchange. Home treatment equipment using these processes are available from several manufacturers. Carbon adsorption filters, mechanical filters of various types, and standard water softeners do not remove nitrate-nitrogen. To read more about the methods available to remove Nitrates, go read the full report.

In addition to any potential nitrates/nitrogen issues, the water tests should also test for

arsenic, lead, E.coli and Chloroform. The issues with lead are well documented, so I won’t go over them. Suffice to say that lead in the water is bad. 

Arsenic is a poison that occurs naturally in the ground in Michigan and shows up in almost all wells at some level. Arsenic ingestion can result in both chronic (long-term) and acute (short-term) health effects. Acute effects can include nausea, vomiting, neurological effects such as numbness or burning sensations in the hands and feet, cardiovascular effects and decreased production of red and white blood cells which may result in fatigue. Chronic effects include changes in skin coloration and skin thickening and small corn-like growths that can develop especially on the palms of the hand and soles of the feet. Chronic exposure to arsenic is also associated with an increased risk of skin, bladder, and lung cancer. There is also evidence that long-term exposure to arsenic can increase risks for kidney and prostate cancer. 

There are filters that may be added to your water system that will remove up to 99% of the arsenic from the water. As a side benefit they also remove several other heavy metals that are not good to ingest in the water either. 

E.coli is a bacterium that causes an intestinal infection. We hear about it most often as being caused by contaminated foods, but is may also be in the water system. While it is often caused by animal feces at the surface level, in wells the main cause seems to be infected bugs that get into the well casing, due usually to cracks in the well head cover. The bugs may have picked up the bacteria from animal feces and carried it with them to the inside of the well casing. Once there they die and fall into the water at the bottom of the pipe – the water that the pump into your home. An E.coli infection is pretty nasty and can be life threatening. There are no sure ways to get it out of the water with filters. You could put in a reverse-osmosis system for your drinking and cooking water, but it is much easier and less expensive to just treat the well itself to remove the threat by having the well chlorinated to kill the bacteria and then making sure that a new, secure cap is on the well head.

Chloroform, a simple compound consisting of carbon, chlorine and hydrogen, and is often a byproduct of water chlorination. Chloroform was the “go-to” anesthetic during the American Civil War. Doctors eventually stopped relying on chloroform for surgery and childbirth after it was shown in some cases to cause adverse effects on the heart, liver and/or kidneys and safer anesthetics were developed. Most coliform bacteria will not likely cause illness. However, these bacteria are used as indicators in water tests because their presence indicates that disease-causing organisms (pathogens) could also be in the water. The presence of some types of coliform bacteria in the water signal the presence of feces or sewage waste. Feces and sewage wastes are usually the source of the disease-causing organisms (see the E.coli advice above).

There are many more organic or inorganic things that can show up in well water, some caused by industrial or farming pollution and many that just occur naturally. You can’t see or smell most of these potential health hazards in the water and most are not going to be handled by the normal filters and water softeners that may already be in place. You just won’t know until you get sick, unless you have the water tested.  

The bottom line is that you should go ahead and spend the extra money to have the water tested or take the time to get a water test kit from your County Health Department (for $6 in Oakland County, Michigan)  and draw some water from the tap in the home that you are buying and turn it in to see what is in your water. In 90% or more of the tests there may be traces of any or all of these potential health treats; however, they rarely show up in concentrations that are dangerous to humans. Some of these hazard have cumulative effect, so they build up over long periods of time. Water is necessary for life; however, water-born chemicals and bacteria can make life miserable, so test the water before you finalize the sale.

Local business event this week - Heinsight Eye CAre

The Huron Valley Chamber of Commerce is holding a ribbon cutting event this week during an

open house by Heinsight Eye Care. Dr. Marla Hayden is the new owner of Heinsight Eye Care, which was previously known as Heinsight Optical. Dr Hayden and her staff have made many changes to the practice, including a complete remodeling of the facility. Come and check out Heinsight's remodel and meet Dr. Hayden and staff. Open House from 5-7 p.m. and ribbon cutting at 5:30 p.m.

Dr. Hayden graduated from Illinois College of Optometry in Chicago in 1999.  During her last year in optometry school she worked at Omni Eye Specialists in Baltimore and the Detroit VA Hospital. She specializes in primary care optometry including treatment and management of vision disorders and ocular diseases such as dry eye. Think of Dr Hayden as your primary eyecare specialist. If she finds a disease or disorder that she can't treat, she will refer you to the appropriate specialist who can.  She also has extensive experience in fitting contact lenses,

including single vision, monovision,  bifocal, multifocal and Ortho K/CRT lenses.  

 

Dr. Hayden purchased Heinsight Optical in June of 2015 and is looking forward to the next phase of her career.  She has enjoyed exploring the Milford area and loves how genuine and caring the people of Milford are. Dr. Hayden grew up in Kansas, graduated from Kansas State University, and attended Illinois College of Optometry in Chicago. She moved to Michigan with her husband after optometry school 17 years ago. She is a member of the Huron Valley Chamber of Commerce and attends The United Methodist Church in Fenton.

Event details:
Tuesday, December 6, 5 -7 p.m.
Open House/Ribbon Cutting
Heinsight Eyecare
304 W. Commerce, Milford

Get legal help on Lease with Option to Buy Agreements

I recently  read a good article on Lease with Option to Buy Contracts at the RealtyTimes site by Benny L. Kass, a lawyer. Option to Buy contracts are popular with people who may not be in a position to get the necessary financing to buy right now, perhaps because they are still trying to sell a home or maybe because they had some financial difficulties that impacted their credit and are still working their way back from that.

No matter what the reason is behind the need to do a Lease with Option to Buy contract, the buyer

and seller both need to realize that they need help with that contract beyond what a Realtor® would normally be able to provide. Hopefully the Realtors involved have already advised them to get an attorney involved to draft the contract. As Kass points out in his article, there are just too many questions involved in such a contract to leave it to chance.  Even if the Realtors involved have some “standard boiler-plate” Lease with Option to Buy contracts, it is worth a review by your own attorney to make sure that your interests are clearly protected and that there are clear definitions of what happens with any money that has been paid when the option is exercised or allowed to lapse.

In general, the lease portion of the contract needs to clearly define what happens to the money paid monthly as lease payments and what happens with any money that is paid as a security deposit.  In addition, the disposition of any “down payment” money that is paid up front, should the option not be exercised needs to be clearly stated in the document.  Also enumerated in the document should be any restrictions on the buyer during the term of the lease, including what they can and cannot do to the house. The owner might allow painting and minor redecorating but restrict

any real remodeling projects. There would need to be clear provisions for what happens to the remodeling content that might be added to the property, should the option to buy not be exercised. 

Both sides usually go into these Leases with Option to Buy contracts with the best intentions of the option being exercised; however, life gets in the way occasionally and both sides need to have clear protections in the contract for their interests and rights. The seller may not plan on ever getting the property back when he enters the agreement; however, what happens if his own fortunes take a turn for the worse? Can he get his hose back at the end of the lease period or even before?  What will he have to give back to the buyer if that happens?  As Kass points out in his article, both sides would like to have the contract skewed to better protect their own interests. The best contract would clearly state and protect the legitimate interests of both sides.

There is a clause in all of the real estate contracts that I have seen that advises the parties to seek the advice of an attorney. That clause states that the contract is an important legal document and should be clearly understood by all parties. Unfortunately, many buyers and sellers just see a bunch of “blah,blah, blah” legal gobbledygook  when they try to read through the contracts. The Lease with Option to Buy contact is one on which you absolutely should seek the advice of your attorney. If you don’t have an attorney that you’ve used for other things, as your Realtor for a referral. 

Don’t be afraid of winter if you want to sell your house.

Many would-be sellers mistakenly decide to take their houses off the market for the winter or to wait until spring to list. Doing so can actually cost cost them time and money.

According to a press release about a recent study by the real estate brokerage Redfin, the spring real estate season just barely nudged out the winter as the best time to be on the market. The Redfin report showed that 18.7 percent of spring listings received above the asking price while winter listings were close behind at 17.5 percent. What’s more, 48 percent of homes listed in the spring sold within 30 days; 46.2 percent of homes in the winter sold within that time frame.

Our local market makes things even better for sellers in winter because we have an on-going shortage of inventory on the market. So, while winter may be a period when there are fewer home shoppers out looking, there are fewer other houses on the market for your home to compete with for their attention. Not only that, but those who are out looking serious buyers and not the nosy neighbors and tire-kickers that are out there in the warmer months.

This time of year, little touches like having a fire going in the fireplace and leaving hot coco and cookies can also make the visit experience more pleasant for winter time visitors. You may also like leaving scented candles burning, but be very careful and very conservative with that. Too many or too much scent can actually be a turn off and some people are even allergic to the stronger scents. Even a little Holiday music playing softly in the background could help set a positive tone for the visit. Certainly and effort should always be made to make sure that lights are turned on, especially the porch lights, during these darker winter months. Don’t get hung up on the cost of burning a few lights when you are trying to sell a big ticket items like a house.

If you decorate for the holidays while your home is listed, you may have to tone it down a little this year and go for a traditional and tasteful look. Remember that not all potential visitors actually celebrate Christmas in a traditional Christian way. Perhaps you should also keep the blow up Grinch Who Stole Christmas in the garage this year. Make sure that any expensive presents are safely locked away during visits and not tempting visitors from under the Christmas tree. Finally, make sure that your decorations do not impede someone from walking through your house. They are there to hoping to buy a house and not to see how many Christmas do-dads you’ve collected over your lifetime.

Once we get past the holidays and into the deep winter, especially the snowy months, you will have to make some adjustments in your efforts. You’ll need to keep the snow cleared off

the driveway, the walks and porches and salt down any ice that may be on any of them.  A person who slips and falls while trying to get to your house is not likely to buy it. It’s OK to insist that visitors remove their shoes or boots in the winter; however, you should also make sure that there is a rug or mat at the front door to put snowy shoes on and a bench or chair that visitors can use to sit on and put their shoes or boots back on. It would be nice if there were a coat rack handy or if you’ve cleaned out the front coat closet, so that they have somewhere to put winter coats while looking at your home.

The fall and winter months are not a bad time to sell, just a different time, in terms of what you need to do to make the experience of visiting your home pleasant. It also requires more discipline from you and your family so that your own family’s winter wear and boots aren’t taking up all of the space in the front hall or mud room entrance. Remember also that, during the winter, your house is closed up odors, especially cooking odors linger. You can either tone down the odor level of your cooking or buy industrial size spray cans of Febreze and spray wash your house well ahead of the showing.

Call me for a visit and event more helpful tips about selling your home in winter.

Physicians Loans - Just the right prescription for a new doctor

Some time ago I wrote about a special program for newly minted doctors that allow them to get a

home loan right as they get out of med school. These special doctors’ loans are aimed at the interns who are completing their internships and about to launch into their careers. What makes them special is that they discount the huge student loan debt and start-up costs that doctors incur at the start of their career and focus instead on the fact that doctors have historically been good credit risks. So, these loans are extended to new doctors to allow them to buy their first home as they establish themselves in their new careers.

The doctors’ loan programs have been updated since I wrote that piece and there is a great update about the program at this site - https://www.doctorloanusa.com/14-things-to-know-about-physician-loans/

This is a great program for new doctors; and, remember that I can help you find that new home, if you are looking in the Southeastern Michigan areas of Oakland, Livingston and Macomb Counties. Give me a call or send a text or email and let’s find you a new home- doctor.

Norm Werner, Realtor

Cell: 248-763-2497

Email: normwerner@comcast.net

Web: www.movetomilford.com

How does your house look naked?

This is the time of the year when your house is (or is about to be) sitting there naked. When the

leaves are off the trees and all of the landscaping plants that looked so beautiful earlier in the year have died, your house is sitting there in all of its naked beauty or ugliness. It’s time for a new curb appeal check and likely some maintenance that you didn’t see that it needed during the summer.

Even just cleaning up the leaves and debris that collects in yards in the fall can help; but, more than likely there is a lot of fall pruning and weeding that needs to be done, if you house is to look appealing in the buff. Visitor’s eyes will also be drawn more than ever to the front door and a door that is shabby and needs to be painted will have more negative impact than ever.

And, how about that driveway and walk? Now that they are out there by themselves, do they send the message that these are people who take good care of the property; or do they scream SLACKERS to the world? You never get another chance to form a first impression and that impression carried over to how the visitors look at the inside of the house. 

In the summertime, most people will be distracted and happy with a nice landscape display. They will love looking at the flowers and decorative bushes and trees that you may have, along with your well-manicured lawn. Good landscaping for your house,like good clothes on people, hides a lot of sins. In the fall and winter, they have no such distractions, so they just look for flaws in your naked house,

What can you do to help?

• ·         Well, for one, make sure that your gutters are cleaned out and not overflowing with leaves and debris. Check your downspouts and downspout extensions, too.
• ·         Power wash off the green algae that may have built up on the north side of your house.
• ·         Power wash your deck, walkways and driveway and fill in any driveway cracks and make sure that it is sealed for the winter.
• ·         Weed flower beds around the house and trim back your bushes. Rake the mulch to make sure that it looks good. If you have any leftover mulch add that to the beds as needed. 
• ·         Paint that front door, if it needs it.Studies have shown that the impression that the front door makes is one of the strongest positives or negatives that visitors take away from a visit.
• ·         Make sure that he front porch lighting looks good (or replace it) and make sure that it works. Dark front porches in the fall and winter are a big turn-off to agents and visitors alike.
• ·         Take a look at the shutters, if you have them. If they are faded and shabby looking, paint or replace them.
• ·         Check out the wood trim, if you have any, and make sure to replace any rotted boards and paint any trim that need it.

If these ideas all seem like you are just applying makeup to the house; well, that’s pretty much the idea. If you were standing there naked in front of someone, wouldn’t you at least want to have your best makeup on? 

Give your house its best chance to make a good first impression as it stands there naked in front of visitors.

Don’t let closing cost sink your home purchase…

According to the National Association of Realtors 2016 Profile of Home Buyers and Sellers - First-time buyers who financed their home typically financed 96 percent of their home compared to repeat buyers at 84 percent. The most difficult step in the home buying process was saving for a down payment, as cited by 13 percent of respondents. For 61 percent of buyers, the source of the down payment came from their savings.

Of buyers who said saving for a down payment was difficult, 49 percent of buyers reported that student loans made saving for a down payment difficult. Forty percent cited credit card debt, and 34 percent cited car loans as also making saving for a down payment difficult. Even so, buyers continue to see purchasing a home as a good financial investment.

What few people know is how many deals fell apart when the buyers, who were focused almost completely on the down payment, learn what the closing costs will be for the purchase. The buyers' closing costs can run 4-8% of the purchase price (sometimes more), depending upon the various fees, charges and points that the mortgage lender adds. In Michigan, things that are generally lumped into the term “closing costs” include any transfer taxes or fees that the state or local governmental bodies may levy, plus the cost of a title insurance policy. The local tax pro-ration for the balance of the summer and winter tax years is also levied, since Michigan taxes are paid ahead. It may also include the escrowed funds for upcoming tax bills and the cost of the first year’s homeowners’ insurance.

Even on a starter home in the $150,000 price range; covering the closing costs can mean an additional sum between $6,000 and $10,000 that the buyer has bring to the closing table. Many times that is the deal killer. Even worse is the fact that many buyers aren't adequately forewarned about these costs by their mortgage lender until they have already made an accepted offer and sunk money into things like the inspection and the mortgage application fee.  It is quite easy for the buyer to have between $500 to $1,000 sunk into the deal before he/she discovers that they can’t afford to pay the closing costs.

A good Realtor will usually advise the would-be buyer to make sure that they understand this aspect of the sale. Realtors will always require that buyers get a “pre-approval letter” from their lender before making an offer; however, most of those so-called pre-approval letters are really just pre-qualification letters that are based upon a very cursory look at the borrower by the lender.  Those pre-approval letters and the advice from the lender to the buyer seldom go into the detail of covering the closing costs.

Realtors advise buyers to try to get a Good Faith Estimate (GFE) from the lender before jumping into an offer. That GFE will detail all of the probable closing costs, based upon what the buyer has told the lender at that time. Some lenders require that you have an accepted offer in hand before they will take that step, but even they should be able to give the buyer a close enough ball-park estimate before the offer to allow them  to decide whether they can afford to make the offer or not.  The buyer should ask the lender at the time that they get a pre-approval letter for their best estimate on the closing costs.

The buyers’ Realtor can also advise on whether asking for a seller concession to help with closing costs makes sense for the sale.  Many times it is possible to ask for those concessions, if the seller is willing to make a full price offer, or close to it. Some loan types have restrictions on how much the seller can make in concessions to cover closing costs; so, buyers should coordinate that with their lender.

Some first time buyers get assistance from their parents on either the down payment or to help cover closing costs. That’s fine, but it must be documented as a gift and not a loan from them. The buyer will need a letter from the parents stating that it is a gift and may need further documentation from the parents to satisfy the mortgage underwriter.

It is possible to get FHA loans with as little as 5% down and some VA and RD loans can be done with zero down. That would allow the home buyer to shift the money that they may have saved for the down payment and use it for their closing costs.  Buyers should check with their lenders to see if they support those types of loans and if they might qualify for them.  The Realtor should be able to tell them is they are in an area that qualifies for Rural Development loans.  First time buyers who are veterans should definitely check to see if they are covered by VA benefits.

In Michigan there is also a first time home buyer’s Down Payment Assistance (DPA) program through MSHDA (Michigan State Housing Development Authority).  This program is for first time buyers and required that the loan be an FHA, VA or RD (Rural Development) loan. The program allows up to $7,500 in down payment assistance which can be applied against the down payment and the closing costs.

The bottom line here is that buyers need to be aware of the potential closing costs on any home purchase and should look into the options that they have to try to cover those costs. Being aware of, and saving for, those costs is just as important as saving for the down payment.  Don’t let those closing costs sink your home purchase.

Well, it was good enough for us…

As a Realtor, I hear that line a lot; especially when discussing the potential sale of their home with older sellers. Many older people with who I deal have lived in their homes for decades. Those homes were built in the 60’s, 70’s or 80’s and were probably state of the art at the time; or, at least, they represented the styles and tastes of the times in which they were built. Unfortunately, many of the would-be sellers never saw any need to change anything about their homes. If it didn’t break or wear out, “why change it?” seems to be their mantra.

So, when I come along and try to offer my advice on things that need to be updated in order to make the house more sale able, I get the retort, “It was good enough for us all of these years, so it should be good enough for buyers.”

No. No, it isn’t good enough for potential buyers. You are asking them to pay good money for something that is out of date, or on its last legs, that you have grown accustomed to putting up with and accepting. You have become “nose dead” to the odors from your house that arise out of outdated styles and worn out appliances and tired infrastructure. Well, it was good enough for us…

Those little maintenance items that you ignored and walked past all of these years now draw the attention of visitors and they evaluate your house against others that they visit. The woulda, coulda, shoulda’s of things left undone in your home pile up in their minds and the long list of expenses to fix those issues detracts of its perceived value. Well, it was good enough for us…

The things that, in your mind anyway, are “easy fixes” may look daunting to the would-be buyer who is not handy and doesn’t have the time to tackle your “honey-do list”. Some things are not even fix-able - the architectural style that is no longer in favor is usually the biggest. Some things loom as huge and costly update jobs – replacing the dated kitchen and baths. And some just raise further questions about what else may be wrong with the house, due to deferred or lack of maintenance – missing plug or switch covers, broken or missing cabinet pulls or perhaps a rusty and dirty old furnace or water heater. Water stains on the ceilings that you never got around to repainting will raise questions and concerns. Well, it was good enough for us…

When owners dig in there heals with that line as their defense against taking any of my

suggestions and doing the things that need to be done, I know that we are in for a long listing, if I even take it. The same owners will usually resist making the price concessions at the front-end that need to be made to sell their property in its “As Is” condition. They usually also resist the advice that feedback from showings provide, which invariably confirms what I’ve told them to begin with – that “the house needs too much work and is overpriced.” Well, they continue to say, it was good enough for us…

Most of the time, though usually months (sometimes years) later they finally give up and drop the p[rice to where it needs to be to sell what is a “project house.” Unfortunately for me they may not do that while I have it listed. They will make one (or more) agent moves, convinced that I’m just not trying hard enough to sell their home – or the next agent or the agent after that. Surely it can’t be their home; because, after all, Well, it was good enough for us…

Sometimes an intervention by children or perhaps a trusted friend will help them see that what I’ve been telling them and what the market has been telling them is the truth. They normally will have been through the denial phase and perhaps cycled through the anger phase (usually anger directed at their agent) and are ready for the acceptance phase. They are ready to say, OK, I hear you; but, Well it was good enough for us…

Hopefully, you can avoid the delay and the pain and anguish of having to go through this when it comes time to sell your house. The key is not to let yourself become complainant about things in your home – not to become nose dead to the things that need fixing or updating. You can watch TV shows on the HGTV channel that will show you want’s trending in home style and décor in various parts of the country; however, those tend to be set in areas of the country that may not reflect trends in the heartland.

A better way is to establish a relationship with a local Realtor and invite them in from time to time to give you feedback on your house and what needs to be done to make it more marketable. Of course, they are going to do so in hopes that you will use them when you do list, and that’s a reasonable expectation. The key it to listen to what they tell you; then make a list of update and repair projects and work down that list.

I advise clients all the time that they need to be planning and making update investments in their homes all the time – something every year and something major (kitchens or baths) every five years. Of course they also need to stay on top of maintenance and not let things slide to where they become used to the broken or worn out things being as they are; this should include looking to see if it is time to replace that old furnace that is still the original or the hot water heater that’s looking a little rusty and shabby.  

One of the simplest things to keep up with are changing color palettes. Tastes in interior and exterior colors change every few years and homeowners should keep abreast of the latest trends and see if the new colors would work in their home. Just committing to a new paint scheme will force you to also take care of those little items that you’ve been putting off, like that missing or broken electrical cover. You should also look at things like new lighting, new area rugs and other things that go along with a new and fresh look.

So, if you live in my area and have been thinking about retiring and moving on or just think it’s time to move up to  a bigger and better house, give me a call. I’ll visit and give you my feedback about what the house may need in order to sell on today’s market. When I give you the list of things that I think need to be fixed or updated; please don’t say to me, Well it was good enough for us…

But where would I go?

That’s the big question. A recent Redfin survey found Forty-five percent of more than 1,700 home owners say they are planning to sell, but the majority of them aren’t sure when they will list. Concern over finding a replacement home is the top reason for their indecision.

Many of those would-be sellers want to upgrade their home, but are concerned that they won’t be able to find what they want. Many others are in the Baby Boomer generation and are ready to downsize, but they have similar concerns.

The issue of home owners synchronizing a sell and a buy has been around forever; however, recently the “tight” market, with lower than historically normal inventory as exacerbated this issue. Add to that the uncertainty of new mortgage requirements that when into effect in 2014 and it’s no wonder that confusion and concern reign.

The new mortgage rules were created by the Consumer Financial Protection Bureau and were mandated under the Dodd-Frank Act to ban many of the practices that led to the housing bubble burst in 2008. The mortgage process has become much more cumbersome and has stretched out the timetable between the acceptance of an offer and the closing by 15-30 days.

The slow recovery from the “Great Recession” has added to the problem by helping to stall out certain price bands in the real estate spectrum. The low-end of the market (starter homes, perhaps up to $200K) has been robust, due in part to the pent up demand for starter homes following the recession. The issue has been in the middle of the market, from $200K to $400K, which is historically the “move-up” market. Lack of certainty about the future and a lack of inventory of even larger homes has caused this segment to stall on their normal move-up plans. As they have stood pat in their homes they have caused an inventory shortage problem for the buyers right below then who would otherwise be looking to move up from their starter homes.

A good deal of the problem above the mid-market has been caused by Baby boomers, sitting on their McMansions (in the $400-600K range) well past when they were expected to retire and downsize. Many have discovered that they didn’t plan and save well enough to retire, so they are holding off those retirements. Others had such leveraged positions in their McMansions that they now discover that they can't get out from under them and have enough left to buy that retirement home that they has dreamed about. Still others are OK on their current home, but just don’t see clearly where they would move to if they downsized. The overall effect has been to stall out that move-up segment of the market due to a lack of inventory from these reluctant Baby Boomer sellers.

The home building industry also contributed to the problem by almost going dormant during the recession. Many sold off their lot inventories and quite a few failed or got out of the business. Those who rode out the bad time have discovered that so many workers got out of the building trades industry that there is now a shortage (severe in some areas) of skilled construction workers. What that has resulted in is a building industry that has been unable to fill in the space left by the inventory shortage, especially in the downsizing price bands that the Baby Boomers are looking into. Pretty much across the board, from single family homes to condos to apartments; there is a shortage of new builds, when compared to the market demand.

So what’s the would-be downsizing buyer or the move-up buyer to do? Where would they go? The key in this market, more than ever, is to be working with a good Realtor®. There are places out there for you. They are just harder to find and many of them will require some compromise on your part. Buyers in those classifications often come with long lists of “must haves”. Many of those expectations may not be realistic with in the constraints of other criteria. Sometimes those must have lists form the basis for buyers searches on Zillow or other real estate sites and they miss many homes that might have worked. That’s why they need a Realtor

A good Realtor will work with you and will do the necessary vetting of potential properties to find you a few good candidates. He/she will also figure out which of your criteria are really “must haves” and which are “nice to haves”. He/she will insist that you go see some houses that don’t seem to fit all of your criteria, because they know that a home with enough positive selling points will overcome a few objections. They will also be able to point out the other, “life-style” issue about a particular area that may help you overlook a few things that need to be changed later. Good Realtors don’t interject themselves into the buying decisions; they just make the choices while looking better and the process of buying easier and smoother.

So the best answer to the question, “Where would I go?’ is to start by gong and finding yourself a good Realtor first. You’ll be glad you did. You’ll find the right new home faster and get through the buying process easier with a Realtor as your guide. Your new home is waiting out there and your Realtor will help you find it.

Wire fraud reaches new depths.

The crooks of this world are nothing if not resourceful and clever about finding ways to steal from innocent victims. Wire fraud in reals estate transactions are a recent but growing and serious problem.

The way this form of fraud works is that the bad guys hack into the email accounts of either the Buyers’ Realtor involved or the Buyers’ title company. Changes to closing policies over the last few years have dictated that all funds to be used in a real estate transaction about a threshold of $25,000 must be wired in at closing. That usually means that the Buyers’ bank or Mortgage Company sends an electronic wire from itself to the title company, effectively transferring the funds into the title company’s account.

In order to facilitate these transfers,  the Buyer arranges with his bank for the transfer by sending them the “wiring instructions” from the title company. Those instructions provide the bank routing numbers and account numbers of the title company accounts into which the funds are to be wired. In some cases the Sellers may also provide wiring instructions for the transfer of proceeds funds into their banks. Even the companies holding the mortgage on the property use wiring instructions to instruct were the mortgage payoff is to be deposited. All of those instructions are usually sent to the other parties involved in the transaction using email.

It is the use of email that the fraudsters have seized upon as an opportunity to game the system. They hack into the email accounts of the parties involved, usually the Buyers or the real estate agent, but is could also be the title company or even the banks. They basically hijack the email account and use it to send fake emails that change the wiring instructions. The emails look like they are coming from a trusted party and are passed on to the bank. The fake emails re-route the wire transfer into an account owned by the fraudsters. They immediately clean out the account and are gone with the money. Things can also get nasty as the defrauded parties try to figure out who’s on the hook for what in the loss.

We are now advising clients about this issue and warning them about the techniques that the bad guys are using. We will shortly be having buyers sign a release document that specifies that they understand this crime and what they need to do to prevent falling victim to it. the advice being given includes:

• ·         Realtors should never be involved in forwarding wiring instructions or closing packages with wire instructions in them to anyone. Consumers should only get wire instructions directly from their title or mortgage company.  
• ·         Buyers should never accept any email wire instructions (often included in closing packages) that are not encrypted from their title or mortgage company.
• ·         Wiring instructions never change in mid-transaction.  Any email talking about a change should be considered fraudulent.
• ·         Before authorizing any wire, buyers should use a 2-step verification that includes a voice-to-voice conversation with a known individual to confirm the information.
• ·         If you are concerned about using a wire, ask the title company if they will accept a cashier’s check (typically brought in 2-3 days prior to closing to give time for the funds to clear). 
• ·         Buyers should change their passwords to their email accounts often and use strong passwords that cannot be easily guessed by the bad guys.

It certainly seems that the very technologies that are supposed to make life easier in this case also make it much more fraught with danger.  This is yet another example of a form of identity theft (your email identity in this case) that can cause great harm

If you are about to enter into a real estate transaction; take the warnings and instructions outlined above to heart.  As the use of technology become more ubiquitous, unfortunately we must also become more and more cynical about cautious about it and concerned and careful about not letting the bad guys assume our electronic/technology identities, even for a moment.  Be safe out there!

Look at your house like I would…

Every now and then you should look at your house with the critical eye that a realtor might or that a buyer might use to evaluate it. Why? Even if you have no plans to sell, looking at your house like you have to get it ready to sell will give you a list of things that you’ve become “nose-dead” to in your home. You will have a to-do list when you are done.

Starting on the outside –

Start at the street out in front of the house and look at -

• ·         The visual first impression of your property overall
• ·         The condition of the driveway and walk (if any)
• ·         The appearance of any shrubbery or other landscaping – is it well kept or overgrown?
• ·         The appearance of the front door- the door & its hardware, lighting fixtures, stoop or porch

Walk around the house looking up at the roof and trim. Does the roof look like it needs replacing? Is the trim rotted or missing pieces, does it look like it has been maintained? Look at the windows and the back door. Look at the rear deck or patio.  Does it look like it is well maintained or does it need attention? Is there an old rusty swing set back there?

Even though you may always enter through the garage, go in through the front door.

What is your first impression of the entryway? Does it impress you or leave you cold? Is there a coat closet in the entry hall?  What is the flow from the front entry? Is there a direct hallway to the rear or must you go through another room to get there?

Walk through each room slowly, looking up for any signs of water damage, at the walls for any paint issues and at the floor for the condition of the flooring. Look for any missing light switch or electrical plug plates. Do the light fixtures look modern or dated? Is there carpet everywhere or wood floors? If there is carpet, is it in good condition? Check for smoke detectors here and on every level, as well as Carbon Monoxide detectors on every level.

What is you impression as you walk into each room? Does it look cluttered? Is your eye drawn to something in particular and is that a good thing? Can you walk easily through the room or is it an obstacle course to get through?

Look at all of the windows for signs of failed seals that need replacing. If the windows are old, aluminum sliders, it might be time to replace them and get rid of those marble window sills at the same time. Is there a fireplace in the living room or family room? What is its condition?

Go to the kitchen. Are the appliances old and dated looking? Is the countertop Formica or a more modern material? Are the cabinets dated or worn looking? Is there hardware (pulls and handles)  on the cabinets and drawers? Is the layout dated or modern (more open). How is the lighting in the kitchen? Are there modern can lights and under cabinet lighting? Check under the sink for signs of leaks from the sink or disposal. Is there a pantry? Is it adequate? Is there a dishwasher? How’s the paint? Is there a back splash and how is it? Hopefully there’s not wallpaper here or anywhere else in the house.

Look into the 1/2 bath, if there is one. Does it look modern and updated or old and frumpy? Is

it time for a new vanity and a paint job. How about updated lighting fixtures?

Go upstairs and repeat the room by room walk-through, looking for the same signs of deferred maintenance or needs for updates, especially in the bathrooms. Pay close attention to the ceilings in these rooms for signs of roof leaks.  Also check the hand rails or banisters going up the stairs to see if they are loose or don’t meet current code (max of 3”between spindles).

Go to the basement and check it over for the same types of things. Check the heating and water heating systems for any signs of leaks and see if you can determine the age of the heating system. If the house is on a well and septic, check the well holding tank and water softener for leakage.  Open the electrical panel box and check for any signs of circuits being doubled up on breakers. Hopefully you don’t find an old fuse box. Look to see if there is evidence of DIY wiring running to the service box.

You will likely end up with a list of things that you need to do or get done. Simple things like painting you can probably do yourself; however, anything involving electrical or plumbing or the heating and water systems is probably best left to professionals.

There is additional advice that I would give you, if you were ready to put your house on the market, but that is a topic left for a future post.

Milford Home Tour Headlines a Fun Weekend in Milford

The 40^th annual Milford Home Tour headlines a family fun weekend of events in Milford, Michigan, this weekend of September 17 & 18. The Home Tour, which is put on by the Milford Historical Society, features docent-led tours of five of Milford’s historic homes, with two this year that have never been on the Home Tour before. Several homes will also feature entertainment by various individuals and groups. Proceeds from the Milford Home Tour go to support the operation of the Milford Historical Museum.

Also on the Home Tour itinerary is the Log Cabin on GM Road, next to the fire station, and the Milford Historical Museum at 124 E. Commerce Rd, just one block from downtown Milford. The Museum will feature a special Home Tour display of “Ladies’ Handiwork”, including a lace making demonstration. The Log Cabin will have games and home crafts from the late 1800’s for the kids and whole family.

The Home Tour starts at 11 AM each day running until 5 PM both days. Tickets may be purchased at several downtown Milford locations prior to Saturday – Acorn Farm, Main Street Art, Your Nesting Place and the Milford Historical Museum – or at the homes that are on the tour either day of the tour.  Tickets are $15 for Adults and $13 for seniors. This year’s homes are located at 624 N. Main St, 324 S. Main St, 104 Second Street, 957 S. Main St and 1018 Atlantic St. For more on the houses that are on this year’s Home Tour go to the web site www.milfordhistory.org and click on the Home Tour Poster.

Saturday night will feature a special end-of-season concert called CURRENTS, an evening of indie rock at the new LaFontaine Family Amphitheater, from 7-10 p.m. on Saturday, Sept. 19. Presented by Huron Valley State Bank and the Milford Downtown Development Authority, the concert is curated by Milford’s own Sean Lynch and will showcase three local and regional bands in one night, including hometown band 800Beloved, Grand Rapids-based Dear Tracks and Detroit’s Missionary. The concert is free to the public and will feature all original music. The LaFontaine Family Amphitheater is located in downtown Milford’s Central Park.

On Sunday, September 18, downtown Milford will be turned into a giant parking lot for the 32 annual Milford Car Show – the largest area car show of the year. Cars of all ages and type will be on display with show attendees getting to vote for their favorite cars in several categories from vintage streets rods to modern muscle cars. Over 250 cars are expected for the Milford Car Show which will open to the public at about 10 AM. Cars start showing up much earlier than that ad line up from Main and Commerce Streets all the way down to Central Park. For more on the Car show, go to www.milfordcarshow.com

There is also a Tractor Show on Sunday starting at 11 AM out at the Huron Valley State Bank parking lot at the corner of GM Road and Milford Road. Tractors of all sorts show up for this annual event; from working farm tractors to lawn tractors. There have even been a few steam engine tractors in the past.

So come out to Milford for the weekend on September 17 & 18 and enjoy the historic homes, an indie rock concert, the classic cars and the tractors. Stay and enjoy the many fine restaurants that are to be found in Milford. On Saturday you can also enjoy the great local shops in the downtown area and be sure to stop by the Milford Historical Museum for the lace making display and demonstrations.

We'll see you in Milford this weekend.