Not too fast, not too slow…just RIGHT!

July 18, 2012

“Fast is fine, but accuracy is everything.” (Wyatt Earp) – from the blog Jack’s Winning Words. Go there to find out who said this first in the 4th Century BC.

If Wyatt Earp had been a Realtor those words would have served him well, too. Sometimes we get so wrapped up in the “Time is of the essence” nature of real estate that we lose focus on the need for accuracy. There is another saying that applies from the traffic enforcement people – “Speed kills” – that may apply to real estate transactions, too.

There is certainly nothing wrong with making sure that things move along at an expeditious pace; however, all too often pushing things along too fast results in something being overlooked or not done properly. Sometimes the things that get messed up because of going too fast can be easily corrected, perhaps an Addendum that wasn’t signed or some other documentation issue. However, sometimes rushing to get a deal closed can result in overlooking something serious that you just didn’t have time to check out properly. Usually that’s something that you assumed someone else was responsible to check and they didn’t. (Making assumptions is a bigger potential problem than excess speed)

These days it’s not unusual to hear complaints about how slow the mortgage approval process has become, even on conventional mortgages; however, there’s a hidden benefit to that slowdown. It has afforded all of us more time to make sure that the rest of the process is done accurately. How many Realtors use that extra time to make sure that things are being done accurately is what separates the really good agents from the rest. It’s not how fast you can make mistakes; it is how few mistakes you make that matters.

So, call me about your real estate needs. I’ll handle things as fast as is accurately possible.

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Posted by Norm Werner

Will short sales be derailed by gridlock in Congress?

July 17, 2012

It is an understatement to say that we have an almost totally dysfunctional Congress right now. The combination of extreme polarization of positions by the two parties and election year political posturing has resulted in almost total gridlock. Both parties share the blame for this mess, as both have moved themselves further and further away from any middle ground and the ability to compromise to get any business done on behalf of the American people. It is debatable whether this state of affairs is representative of the state of the nation or not. Let’s just leave it that it’s a shame and a mess.

One of the biggest issues that this non-functional body has to supposedly decide this year has to do with taxes – whether to extend the various taxes or tax cuts that are due to expire at the end of the year. Rather than any thoughtful discussion of the merits of any of the taxes or cuts involved, the “debate” (if one can call it that) has devolved into campaign sloganeering and name calling. Typical stuff in today’s Washington.

Lost in the calliope of bluster from both sides is the fate of a little Act of Congress that is the cornerstone of the short sale business in real estate – The Mortgage Forgiveness Debt Relief Act of 2007. This act, which was extended in 2008 by the Emergency Economic Stabilization Act, provides protection from taxation on the loss incurred by the bank for home short sales. Basically it protects the home seller from being given a 1099 Statement on the amount that the bank had to forgive in order to let the short sale happen. Prior to this Act, home seller would receive that 1099 and be responsible for paying taxes on that amount, just as if it was ordinary income to them for that year. The so-called “Phantom Income” from the sale was treated the same way as a withdrawal from a non-qualified IRA – as if you had received a bonus at work and now Uncle Sam wants his cut.

Obviously, having to pay taxes on money that you never really received was and is onerous to home owners/seller; so, the expected consequence if this tax law is allowed to expire will be a drastic reduction in short sales. That will undoubtedly have the effect of increasing foreclosures, since a short sale is a last resort before foreclosure for many sellers and that would likely throw the whole real estate market for a backward loop into the doldrums again.

So call or write your Congressman and tell them – “Get off your duffs and get to work for me!” Tell them that we can’t afford to let the real estate market slip back into recession while they fiddle around in TV sound bites doing nothing. There needs to be another extension of The Mortgage Forgiveness Debt Relief Act of 2007 before the end of this year. Then they can get back to the mud-slinging and political posturing over what, if any, portion of the so-called “Bush Tax Cuts” to extend and whether or not to completely fail in their elected duties and let the mandated automatic tax cuts of the Budget Control Act occur in January of 2013.

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Posted by Norm Werner

Is the time right for you?

July 12, 2012

From the Jack’s Winning Words blog comes this gem – “Don’t wait. The time will never be just right.” (Napoleon Hill) Hill was one of the original writers of the value of positive thinking. “Believe it, and you can achieve it.”

If there was ever a saying that we, as Realtors, need to get across to potential sellers it is that one. Too many seem to be frozen by the wait for just the right time. For a long while it was waiting until the value decline stopped. Well, it has stopped in most areas and values are now inching back up. So, now, too many are waiting for the value to come back to where it was. That will be a long wait – at least a decade or more in most areas.

We Realtors tend to think that people aren’t listing because they are underwater on their mortgages. Many would-be seller aren’t underwater at all; they just can’t let go of the “value” that they thought they had at the peak of the market. So my advice is “Let it go.” You need to get real and let go of the mental picture that you are clinging to of the value of the place at the peak of the real estate bubble. Your house has lost 25-40% (depending upon the area) of its peak value. It is what it is today. Right now there are buyers out looking. If you’ve been sitting on the sidelines waiting for things to be just right, this is as close as it’s going to get in quite a while. Take to heat the message of Napoleon Hill – “The time will never be just right.”

In fact, the time is as right as it can get, right now in many areas. The foreclosure inventory has been depleted in many market areas, with fewer new foreclosures happening currently. We have flipped over to a seller’s market here in my area, with too many buyers chasing too few listed homes. Multiple offers and offers above asking price are the norm now. Sellers are selling faster and getting market price for their homes right now; they just won’t get 2006 market price. So, if you’ve been delaying your plans to make that retirement move or that move to downsize your life, now is the time to take action. Call your local Realtor and explore the market value of your home with him/her. The time is right to take action.

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Posted by Norm Werner

Is it time to list your home?

June 25, 2012

Everything that you read about the real estate market these days seems positive; so, is it time to list your home? That still depends upon when you bought or what you did when you last re-financed the house and what you still owe on it.  The market has definitely switched over to a sellers’ market. That just means that there are fewer homes on the market than there are buyers out looking. Inventory is down and the pent up demand caused by the last few years of paralysis in the market is starting to manifest itself. Multiple offer situations are the norm right now on low-end houses and even nicer homes in the mid-range.  Sellers are getting at or sometimes above their asking price (if the house is priced to the market).

So, does that mean that you’ve re-gained all of the value lost in the “Great Recession?” No! Values dropped anywhere from 30-50%, depending upon the area. Those losses aren’t going to come roaring back in a few months. While we are seeing positive appreciation in some areas, in general the good news has been that value losses have slowed or stopped and some prices are even inching their way back up. Do the math on how long it will take to recover a 30% drop in value, if he appreciation rate settles in at the historic norm of 3% to 4% and you can see that it will take a decade or more to get back to the 2005/6/7 value levels.

Remember that even with multiple offers at or maybe even above asking price, the place still has to appraise for a value high enough to support the mortgage. That is currently one of our bigger challenges in the market. Appraisers are quicker to adjust than assessors and distressed sales (foreclosures and short sales) are declining dramatically as a percentage of total sales in most markets; so, the “comps” that they use will be a better reflection of the current market and values will not be as impacted by distressed sales. That’s good news. I suppose that you can take the fact that assessors have overshot the mark in the downward direction as good news too, since taxes will be lower longer as their upward adjustments will lag by a year.

The real question remains whether it’s time for you to list. The standard answer is “that depends.” Did you buy at the peak of the market? Did you re-finance at the peak and take the equity value out for other uses at that time? If you answered yes to either of those questions it’s still probably too early for you to consider listing (unless you had a big down payment when you bought and are willing to take some loss on that). Having a house that is now worth less than when you bought it is called being “underwater.” If you are underwater on your home and don’t have the cash to make up the difference a short sale may be your best option.

Many people aren’t really underwater on their homes. They don’t owe more than it’s currently worth. They just can’t let go of the “paper profit” that they thought they had when values were high. I run into many older homeowners who might have bought their home in the 60’s or 70’s for right around $100,000 and watched in delight as it increased in value to around $300,000 in the early 2000’s. Then things crashed; and now they are sitting in a home that might only be worth $170,000 to $200,000. In many cases these people were fiscally conservative and did not cash out equity with refinances; so , many of them owe relatively little on the house.  What they can’t let go of is that “$100,000 loss” that they just took on paper. Sometimes it’s because the value of their home was a big portion of the nest egg that they thought would fund their retirement. So, they are holding on and hoping that the value comes back soon. That’s just not going to happen soon.

The sad thing is that many of the retired folks who feel trapped in their homes would be just as well off to bite the bullet and sell now for what they can get and get on with life. There are so many a deferred dream of retirement that I hear that it’s a shame. That is unfortunately all too true for many Baby Boomers who did treat their McMansions like piggy banks, taking loans out for the boats and new cars and other toys along the way. They really are trapped in their homes and many did not plan well for retirement and have little in the way of funds to use to cover a shortfall at closing. For them a short sale may be the only way out.

For the rest of the would–be sellers in the market the answer remains that the value loss that you might take on the sale of your home will be made up partially or in total by the great value deals that you can get right now on a new home. That works best for those trying to move up in the market. You may be taking a $30,000 hit on your home, due to lost value; however, if you can buy a new home that has experienced a $100,000 loss in value, you are actually coming out ahead when things recover. It’s not so good if you are trying to downsize or maybe move from a house into a condo. You’ll still get a good deal, but you likely won’t make up all of your loss on the two transactions.

The best time to list your home is really more about your life needs. Do you want to retire and get on with life? Do you have to move to take a new job? Is your current home sucking all of your savings down with it?  Are you just tired of taking care of the yard and property? Do you want to move to be closer to family? Has your life situation changed dramatically and now your old home just doesn’t fit? All of those are good reasons to decide to list. You may have to take the course of pursuing a short sale and just get out from under the house.  You may even have to take money to the closing in order to sell.

It’s a good time to sell right now. The real question is whether selling at the current market value works for you. Talk to a real estate professional about your options and which might work best for you. Call or email me for an appointment to discuss your options. If you’d like to read about the short sale option, go to my web site www.MIShortSales.com and read through the FAQ section.  If you want to see what houses are selling for inthis are, go to my web site www.movetomilford.com and browse the data under the What have homes in this area sold for

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Posted by Norm Werner

Don’t put your biggest asset at risk

June 20, 2012

Our InsuranceOne agent, Annette White, talked recently at a sales meeting at our office about a big risk that many homeowners are taking with their biggest asset. In the current real estate market it has become more and more common for homeowners who want to (or need to) move to a different house (up-sizing, down-sizing or maybe just moving closer to a job) to resort to renting out their current home. Most of the time it’s because they are underwater on the current home or just don’t want to sell for what the current market can bear. In any event, many of them buy the new place and move there, with the plan in mind to fix up the old homestead and then rent it out.

That’s all well and good; however, if the renovation of the old house is going to take longer than a couple of weeks, the owners need to talk to their insurance agent about switching the insurance coverage on that house to a vacant house policy for that fix-up period.  Most normal homeowner’s policies have vacant house clauses in them that state that the house must be occupied or the coverage might be invalidated. Why? Because and empty house is an easy target for vandals or thieves. The vacant house policies are a little pricy, but they cover the owners, should something happen while it is vacant and being renovated.

The vacant house policies usually have a three month minimum, with no refund if you get the renovation done early and get renters in. The policy should be changed again when the renters are in to become master policy covering the structure. The renters should have a separate policy covering their belongings and any damage that they might cause.

This same issue arises if the place is for sale and the owner has left or maybe it is an estate sale being conducted by out-of-state relatives of an owner who has died. It’s still a vacant house, even if there’s lots of the owner’s stuff still inside.  Just having some furniture and other stuff inside doesn’t make it an occupied property and if the insurance company finds out from neighbors or others that the place hasn’t been occupied for some time (usually more than 2-3 weeks) they may balk at paying a claim if something happens.

Call Annette White at 248-795-9152 and talk to her about vacant home insurance.

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Posted by Norm Werner

So far, so good…

June 18, 2012

We  are at the halfway point in the real estate year in this area and so far things have shown improvement. Foreclosure sales are down, as are short sales. Home values have stabilized and even started to rise a bit in some of the local markets. Low inventory is still an issue for the local market, but even that seems to be getting better.

I’m seeing many sales with sale price to SEV ratios well above the 2.0 level. That says two things – prices are coming back and the assessors have overshot assessment adjustments ont he low side. You can be sure that they will adjust that as quickly as they are allowed under the Headley Amendment.

Low appraisals are still an issue, too. Appraisers are still using too many distressed sales as comps, but hopefully that will self-adjust as the distressed sales decline as a percentage of overall sales. We are also still seeing too many cases of out-of-area appraisers being assigned to appraisal jobs by appraisal management companies. The lenders are getting better about challenging that practice, so hopefully that too will self-adjust.

Of course the overall slowness of the recovery from the “Great Recession” has impacted real estate, too; however, the pent-up demand that has been building in the market is starting to assert itself, especially in the move-up segment of the market. Because of the lack of inventory, the demand in this segment is helping the new-build segment as more and more stalled out developments are re-energized. The combination of low home prices and low mortgage rates is also propping up the low-end of the market.

So, while we are not out of the woods yet, maybe we can see the edge of the forest. We have flipped over to a seller’s market with the low inventory and are seeing many areas with less than a 6 month supply on houses at the low to mid-pricing points. That’s good news for sellers but a bit frustrating for buyers. The rest of 2012 should be good also as the economy continues to improve and the market seeks a more state.

 

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Posted by Norm Werner

Real Estate Statistics you can use…

June 4, 2012

Are things getting better in real estate? We see articles in the papers every day about the real estate market. One day it’s up the next it’s down. What are we to think? Well, many, if not most, of those articles are picked up by the local papers from national news services; so, at best, they reflect a national look at the market. In many cases they are actually stories about other parts of the country and in most cases they are stories based upon old data. It takes time to gather and analyze home sales data, so it isn’t unusual to see articles that are excitedly tell you about home sales one of two months ago. I saw one today (June 4, 2012) that was reporting the “News” about home sales in April.

What’s really important is what is happening in your market and what is happening now. I focus upon the little patch that I tend to list and sell homes in within Southeastern Michigan – Milford, Commerce, Highland, White Lake, Lyon and West Bloomfield Townships in Oakland County and Green Oak, Brighton and Hartland Townships in Livingston County. I track sales of all of the homes sold above $20,000 in those Townships every week.  I realize that the $20K number is somewhat arbitrary, but I figure homes sold below that cut-off are probably tear-downs being sold for the land value.

Anyway, I gather data from the local MLS and then do some calculations of my own to allow me to report the data in a way that at least I think is meaningful for buyers and sellers.  I show the home addresses, the asking and sold prices, whether the sale was a distressed sale (marked as S for a Short Sale and F for Foreclosures). I also calculate and show the sold price as a percentage of the asking price and then show the State Equalized Value (SEV), which is a number unique to Michigan that indicates ½ of the assessed value of the property, and calculate the ratio of sold price to SEV. I include the number of days that the home was on the market, the square footage of the home and then show the asking cost per Sq Ft and the sold cost per Sq Ft.

Those statistics when analyzed will give a either a buyer or a would-be seller lots to go on to understand the market that they are in right now. I also show the Y-T-D data for each market and have accumulated about 4 years of month-by-month history that is also accessible. Using this data, you can look at the market in a historical perspective, comparing a month’s sales over multiple years, like below. Or you can go look at a specific market Y-T-D to see how it is tracking this year.

Milford market year-over-year comparison for May 2012 thru May 2012 –

Sold in May 2012 – 22 homes at an average price of $200,487 and an average cost per Sq Ft of $94, with 45% of the sales being either foreclosures or short sales.

In 2011 the same stats were – 15 homes sold for an average price of $185,417 at an average cost per Sq Ft of $79, with 60% of the sales being distressed

In 2010 the stats for Milford were – 18 homes sold (56% of which were distressed sales) at an average price of $188,000 and an average cost per Sq Ft of $96.

Of course this is still all historical data, no matter how recent the history; and it is always difficult to spot trends when looking at very small amounts of data and when things are changing rapidly. One major mission ingredient of the market that I have no way of obtaining the data for is how the appraisals are trending. I can see what has happened to assessments over time in the data and I can now see that the assessors have, in fact, overshot the mark in this area with assessed values that are now too low, compared to the market prices. Since homes are selling for values that are higher than the assessed values, I assume that the appraisers have adjusted faster and better than the once a year assessments would indicate.

I started tracking and reporting sales in some of these markets as far back as 2007; however, the format of what I tracked and how I reported it has changed over time, so it takes a bit of work to do comparisons that far back.

Anyway, go to my Web site www.movetomilford.com to see all of the data and reports for the markets that I track. At a gross level they all appear to be doing better and the statistics that I keep about distressed sales show that there are less and less of them this year in most of the markets; however, the cost per square foot is still relatively low in all of the markets that I track, compared to where they were a few years back.

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Posted by Norm Werner

Summer begins…

May 29, 2012

Memorial Day has historically kicked of the Summer season. I marched in the Memorial Day Parade yesterday and it was great, as usual – huge crowds and great weather. I   also spent much of the weekend getting the flower beds weeded and the last of the flowers planted. I got my little flower bed watering system all fixed up from the hard winter and working again and I got the window air conditioners all in (a consequence of living in a house that was  built in 1885 and is still heated by steam radiators). So, I’m ready to go for the summer ahead.

In the real estate world we are in the prime selling season right now and local statistics show the results – more houses are selling this year than last and the inventory is down to less than 4 months worth of houses in most areas. Prices have also started to come back, but not such that sellers have recovered all the value that was lost in the recent recession – that will take years, if not a decade or more. It’s not unusual to see multiple bids on good homes right now, which again helps drive up the prices.

I’m not sure which group is more frustrated right now – would be home buyers who can’t find what they want on the market or might-be sellers who are still under water on their mortgages and can’t afford to sell. Both groups find the current market unsatisfying. There is a third group of people who are also experiencing frustrations – would be renters/leasers. The lease market is even tighter that the sales market for good houses, because so many displaced families (read that foreclosed) have snapped up the lease inventory. That may start opening up a bit later in the year, because there are likely many who are about to exit their 3 years of real estate foreclosure purgatory and be in the market to buy again.

In the area that I cover I’ve also noticed a good trend back to new-build housing coming onto the market. Many builders who headed for the bomb shelters a few years back are now active again and several failed or stalled developments have taken on new life. That’s a good thing. I also note that many of the builders are offering more affordable models with less frills, which is a reflection of a still fragile economic environment.

I’ve just posted the sales statistics for the areas that I track on a weekly basis – Milford, Highland, White Lake, Commerce, West Bloomfield, South Lyon, Green Oak, Brighton and Hartland – on my Website MoveToMilford.com . Check them out for yourself. There is still weakness and a high rate of distressed sales – foreclosures and short sales – in a few of the markets; however, most are down to much more reasonable distress levels. The averages for cost per square foot are still low when compared to where they were a few years back, so good deals are still to be had. Combine that with historically low mortgage rates and it’s a great time to buy.

So, hey, relax and enjoy the summer. Have a hot dog and a beer. Watch a baseball game. Buy a house. It’s a summer tradition!

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Posted by Norm Werner

Facing your fears…

April 30, 2012

“The cave you fear to enter holds the treasure you seek.”(Joseph Campbell) from my favorite blog – Jack’s Winning Words.

I’m a Realtor in Milford, Michigan. In real estate the caves that are oft bypassed out of fear seem mostly to do with prospecting. The cold-calling phone day at the office is something to be avoided. Walking up and knocking on the door of the FSBO is feared. Called the expired listing is daunting. And these days, we might add taking that short sale listing to the list of feared things. Yet all of these thngs hold the treasures of real estate – listings.

There are tons of good articles and books about how to overcome your fears, so I won’t comment here on that. The point is to recognize that you are avoiding many caves that hold potential treasures out of some sort of dread and doing somethng about it. Have a great day and make sure you explore some new caves.

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Posted by Norm Werner

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