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Breaking News!

Fannie and Freddie are changing the rules on how payments on existing primary homes are treated when a buyer is purchasing a new home and plans to rent out the old house. In the past, we have been able to offset the payment on their existing home by showing a lease for the house and counting the rental income to cover the house payment.

Under the new rules, this will only be possible if there is a minimum of 30% equity in the existing home. So, if the house had a $200,000 mortgage on it, then it would have to be valued at over $285,000 to be acceptable as a rental conversion. Otherwise, the buyer has to be able to qualify with both house payments and has to have 6 months of house payments in reserve after closing. Ouch . . .

This change in guidelines appears to me to be directly related to a new phenomenon; people buying a new house and then letting their old home go into foreclosure after closing on the new house. I have been reading about this on the web. The idea is if you owe more than your home is worth then you go out and buy a new home at a great price. You indicate that you are going to be renting the old house out. After closing on the new house you stop making the payments on the old house which has negative equity and it goes into foreclosure. Sure your credit is wrecked but you already bought a new house and your bank loses all of the money on the old house. Some great scam eh?

I don’t know who comes up with these ideas but it is bad for everyone. Forces home values down further and adds to the steep losses which are seriously undermining the banking industry in the U.S. Whatever happened to the idea of living up to your obligations?

The bottom line is that the effort to close up loop holes like this is making it harder for legitimate buyers to keep their existing homes, rent them out and buy a new house. Stay tuned. The currents are changing on a daily basis and I’m just trying to keep you informed.

Dogs are people too, right? Not when it comes to selling a house.

As hard as it may be to accept and implement, when a property is on the market all traces of your beloved pets should be out of sight. This includes the food dishes, toys, cages, pet beds, litter and yes, the pet itself.

Now before you label me anti-animal, let me assure you nothing is further from the truth. My household has included pets of all shapes and sizes for two decades. At one point, I was Zoo keeper (and Proud Mama) to a dog, five cats, two guinea pigs and numerous fish. Our menagerie has been reduced to a more manageable number of pets now … God rest all of my late pets’ souls. The majority of our charitable donations go to animal-based organizations. Most days I like animals more than people.

As a home stager, however, I know that animals pose a problem when trying to sell a property.

When homeowners live with a pet, they become immune to the scents that are left behind. Even if the cat litter is cleaned religiously, odor lingers. A dog left out in the rain can emit that certain “wet dog” smell for days afterwards. As for pocket pets such as hamsters, gerbils, and guineas … well, they just stink.

There are other issues as well. Case in point: I staged a house a couple of months ago, and when I let myself in the side door I noticed the home owner’s two geriatric dogs were confined to the kitchen by a gate. While you may think this is a reasonable solution to showing a house with dogs, I’m here to tell you it is not. Amidst their frantic barking, one of the dogs promptly piddled on the wood (!) floor. My first five minutes were spent cleaning up dog urine. Had I been a potential buyer, the tour may have ended there. At the very least, I would have scrutinized the flooring throughout the house looking for evidence of previous “accidents”.

Sometimes pets can just be pests. At another house I staged, a 7 pound Yorkie followed my every move, and came dangerously close to being stepped on a few times. I suspect other visitors to the house had the same experience, as the owner made no attempt to isolate the dog.

Then you have the homeowners that think it’s great fun to teach their birds cuss words and these birds will always choose the most inappropriate times to show off their amusing skill. In addition, birds have no aptitude for potty training. If the owners allow the birds out of the cage to spread their wings … well, you get the idea.

Personally, we had a guinea pig who embraced her “pigness” and squealed every time someone walked by. Although I thought she was adorable, she drove me nuts. I’m sure our family members were the only ones who found her adorable.

When it comes to snakes, iguanas and other slithery, slimy creatures there are two camps: those that love them and those that are totally creeped out by them. Which camp does YOUR potential buyer belong to?

Someone with allergies to pet dander may find touring a pet-occupied house quite uncomfortable. I wouldn’t count on them making an offer.

There are lots of other issues with pets: barking, nipping, inappropriate sniffing, furballs, using the sofa as a scratching post, sneaking out the door while visitors are entering, as well as a visitor’s fear of animals.

So, as much as we love our pets and consider them part of the family, the best thing to do while showing a house for sale is to remove them. Find a good friend or family member to care for them while the house is on the market. Many doggy day cares have opened in the metro Detroit area recently and may be the perfect solution. If it is not possible to find a temporary home for your furry (and slimy) friends, then at the very least, take them with you on a car ride while the house is being shown. It may be the difference between “For Sale” and “Sold”.

Go Tigers!

THANK YOU WINGS!!

Shhhh. Don’t tell anyone here in Metro Detroit. Unlike many of my neighbors, I don’t really know too much about cars. Last year when I hosted the Carnival of Real Estate #35, I used the Motown theme, so this year I am pretty much obliged to attempt to do something somewhat creative with Metro Detroit’s other big gift to the world (after Diana Ross and the Supremes): the automobile.

For those of you readers who are interested in Metro Detroit Real Estate, yet you find yourself landing on this curious post, the carnival of real estate is essentially a round up of some of the best posts in the vast and ever growing land of real estate blogging from the previous week, as determined (this week) by me. Actually, in the year since I last hosted, real estate blogging really has exploded, and there are now thousands of real estate blogs one could read. But if you are interested in Metro Detroit real estate, of course, you need not look any farther I don’t know if carnival hosts are allowed to use emoticons in carnival posts, so forgive me if I wasn’t supposed to do that.

Like last time, there were lots of interesting submissions.  There were a few more than I have mentioned here that I really thought stood out, but this week I wanted to distill it down to four posts.   Thank you for the good submissions.  On the other hand, quite a few not so interesting, like the one that said “we already link to you, please link us now.”  Folks, this carnival is actually not an orgy of link love.

I hear the engines revving up on Woodward Avenue, so its time for me to get started with this week’s road rally.

The Edsel Award

It had so much potential. And it probably is not fair to compare this post with the most spectacular failure in automotive history because actually the post is interesting, and I was excited about it until one little sentence turned me away.

Future carnival entrants, take this advice to heart: its pretty important not to slam the Carnival host’s stomping ground when you submit, especially if your knowledge of economics seems a little off.

I was excited to see that Detroit topped Zillow’s affordability survey, but then Zillowblog went on to say:

It might come as a surprise that Detroit is high on the list. This probably arises from a combination of factors. First, home prices are very low, so mortgage payments are low as well. The other factor is that Detroit’s high unemployment rate can make the average household income look higher.

OK, correct me if I am wrong, but wouldn’t a high unemployment rate make average household income look lower? I mean, last I checked, unemployed people don’t make much usually, right? Bottom-line, Detroit has been near the top of such lists for a long time. Our cost of living has been relatively low and wages here were/are high.

Now lets motor on to some happier territory.

The Chevy Award

Think baseball, apple pie and Chevrolet. This one goes to Larry Cragun, for his piece “God Bless America and Title Insurance.” We’ve all had sellers and buyers grumble about having to pay for expensive and seemingly useless title insurance at closing. Afterall, how many times do you actually hear about someone filing a title claim? Not too often. Larry’s piece points out that when you need it, you might REALLY need it.

The Corvette Award

Mike Simonsen from Altos Research offers up an interesting piece on hedging real estate risk using MacroShares. At first blush, this sort of investing sounds a bit complex for the average investor, but
the day could come when we are all holding MacroShares in our SEPs and IRAs. Warning: do not take financial advice from me!

The Lincoln Town Car Award

Dan Melson at Searchlight Crusade is so consistently good. This week he writes about why he is hearing about more and more deals not make it to close. I feel fortunate that it hasn’t happened to me, but his statistic of 50% of escrows failing to close in San Diego County is more than sobering.

2008 Malibu Award

The Malibu is the Car of the Year for 2008 and I am going in a completely different direction than I normally would with this week’s top winner. Lauren Mitchell may be the first blogger to ever win the Carnival with a market report. Frankly, I have been writing market reports for 3+ years now and I almost always find them painful to execute. Lauren made reading about Toronto’s market interesting and entertaining. I write about local things and I am happy to have someone who is “keepin’ it local” take the top carnival award.

Well, folks, that’s your automotive update. Thanks for cruising by. Be sure to visit next week’s carnival of real estate on Renthusiast.

Big thanks to Drew Meyers from Zillow for keeping the carnival running so smoothly for all these months!

I hesitate to write this post because I hate to put ideas in anyone’s head about how to commit fraud. The perpetrators are always one step ahead of the banks and “the system” and, just like with mortgage fraud, the rest of us will all end up paying the bill for the latest trend in sticking it to the bank. I learned about this today from Greg McClelland, the Michigan Association of Realtors legal counsel, who is seeing this taking place.

Here is how it works:

Nice, honest, and unsuspecting Realtor Jenny takes a short sale listing. Deciding it is more work than she can handle, she accepts the assistance of a “short sale expert” (I’ll call them SSE) who promises to facilitate the deal with the banks. Personally, I understand Jenny’s motivation: short sales are a TON of work for the listing Realtor, and the likelihood of actually getting compensated for that work can be pretty low, especially to an agent inexperienced in short sales. Not to mention that the banks, as a rule, look to the Realtor’s commission as a great source of funds for reducing their losses, ie, they like to cut commissions as much as they can.

Jenny has had the house listed at $200k and is getting a fair amount of activity, but no offers yet. Jenny feels her market analysis is right, and the house will achieve something close to asking price.

SSE tells Jenny to slash the price to $125K, and tells the owners to make the place look as dumpy and undesirable as possible. Jenny is told to remove all decent photos of the house from the MLS and the internet. Jenny is also told that if she meets or talks to the bank’s appraisers or BPO agents that she will lose her commission on the deal. SSE handles all communications with the lenders.

Jenny gets an offer for $125K on the house from a buyer produced by SSE, and SSE submits it to the bank and tells Jenny to leave the house on the market. Jenny gets another offer for $195k, gives it to SSE who never submits the second offer to the bank.

The bank approves the short sale at $125k. It closes, and the same day SSE’s buyer sells the house to the buyer who was willing to pay $195k, netting a very nice profit, which is presumably shared with SSE.

Realtors beware. I am sure there are some wonderful short sale experts out there, but if it does not pass the sniff test, I would walk away as quickly as you can.

Technorati Tags: short sales, short sale, short sale fraud

Photo courtesy of Chris Boyle

I was driving down Harmon Street in Birmingham today and I was compelled to jump out of the car to take pictures of a couple of homes with beautiful flowers in front of them. After our especially long winter, the bright colors seem even brighter this year.

Thank you to this Harmon Street homeowner (and a few others) for making my day!

When the Feds dropped the prime a couple of months ago, my husband and I decided to refinance our home in Rochester Hills. Our 5-year ARM was maturing in September.

We never planned to refinance this home. In fact, I believe the phrase “if we’re still living here in 5 years, I’m going to shoot myself” was voiced when we chose the 5-year plan in 2003. Our Christian Hills abode was far from our dream home. We had only been living there two years at that point and had already dumped a ton of money on various repairs and issues. We had unknowingly bought a “handyman’s special”. There were two major problems with that scenario: a) the home inspector failed to alert us to many of the glaring money-sucking issues (but that’s a whole other post!); and b) no handyman lives here.

With a 2008 resale in mind, we embarked on renovations. Big stuff. Expensive stuff.

We finished the basement. . . twice. Apparently our basement has a propensity to flood, whether it be from a leak in the wall, a water heater past it’s prime, a bad sump pump or a frozen sump pump discharge. Two sets of walls and two rounds of new flooring later, our basement is fabulous. We replaced the painted-shut windows on the main floor and had a doorwall installed where there was once a window. We installed a new roof, custom patio with new landscaping, hardwood floors throughout, a new driveway, and new cabinets and granite in a bathroom. We completely overhauled the front landscaping and had major tree work done. Every room in the house has been repainted, some more than once.

Conscious of the steadily falling home values in Oakland County, we anxiously awaited the results of our bank-ordered property appraisal. Our money pit appraised for $50,000 less than it did 5 years ago, and $10,000 less that when we bought it 7 years ago. Aaaaack!

Our loan officer told us we were actually quite lucky, as some homes were appraising for almost 50% less than their prior purchase prices. Our outlook changed immediately upon hearing that, and we realized that all of our upgrades helped to hold our property value as steady as possible in this housing climate. We consider ourselves fortunate that since we had over 35% equity in the house, our payment only increased $90 per month. As foreclosures abound, we know that the majority of those with maturing ARMs can’t count on that.

So, we’re once again the proud owners of a 1966-built colonial in one of the more desirable subdivisions in the city. We continue our quest to bring the house into the new millenium and have several more projects on the horizon. Big ones. Expensive ones.

When the real estate market rebounds and our youngest is off to college, we’ll be ready!

Go Tigers!

Go Red Wings!

Thanks for a great season Pistons!

Look for me Sunday morning, perusing the wonderful offerings at the Birmingham Farmer’s Market.  The season kicks off at 9 am in the parking lot on Old Woodward at the end of Harmon, kitty corner from Booth Park.

The organizers have done a GREAT job with the farmer’s market since it started, and I know they have lots of fun events planned for this season.

The Birmingham Bloomfield Realtor Network is happy to be sponsoring the farmer’s market this year, and we will have members there 5 Sundays to chat with you.

In the last few weeks we got an offer on a new listing within 6 days of it hitting the market. Not bad, huh? For all the bad things you hear about the Southeast Michigan real estate market right now, there are lots of stories that are not sexy enough to make it in the main steam media.

I’ve long done anecdotal market reports here on miOaklandCounty.com. Before the stats come in from Realcomp, I tell you what I am seeing out there on the street. In the last few weeks, I have been seeing A LOT.

• SKBK Sotheby’s reported that it had it’s best month in 4 years in April. That means 10’s of millions of real estate transacted in Oakland County (with Sotheby’s agents driving those sales).
• Dmitry and I are having our best year ever. I don’t say this to brag, but to let you know that homes here are selling in spite of what your neighbors are telling you.
• I’ve been trying to find a NEW spec home in Birmingham for a client who is in the $1,000,000 to $2,000,000 range and the pickings are slim. We have a couple of great choices, but inventory is low. I see an opportunity in that segment of the market, once the builders are ready to take the risk again.
• We are still seeing strong rental activity, but it looks like rental prices are heading up.
• We have had/been involved with multiple offer situations on at least 6 or 7 properties this Spring. Buyers are competing when a property is well priced.
• This winter, rentals dominated the transactions in the MLS. Sales have clipped way up in the last few months and have passed the rentals.

Certainly our market still has some challenges brought on by the broader economy and the mortgage market, but we are seeing a surge in activity. Prices have continued to trend down. But, most people don’t realize that a market has shifted until a few months after the best opportunities have passed. I don’t have a crystal ball to know when that might be, but my gut tells me that we are in the midst of a shift.

There has been a lot of buzz out there this year about how mortgage brokers created the current crisis in mortgage lending.  Say it isn’t so!  Well, it isn’t.

Mortgage brokers can only work within the framework of guidelines set up by the investors (banks) who buy loans from them. The bank sets down rules for minimum credit score, max loan to value, documentation requirements, etc. Mortgage brokers do not approve loans. They fit customers into programs that investor banks offer.  Barring actual fraud on behalf of the broker it’s the bank that decides if a borrower is credit worthy.

One of the things being talked about right now is inflated appraisals.   A new ruling attempts to address appraisers being influenced by lenders and brokers to come in with a certain value on a property.  There is no doubt that some lenders do try to inflate appraised values to get a loan transaction approved.  However, most lenders, brokers and appraisers are ethical and don’t engage in this type of activity.

This new ruling, dubbed “The Home Valuation Code of Conduct” proposes sweeping changes in the way appraisals are ordered.  Under the new rules lenders and brokers would not be able to directly order an appraisal in a loan transaction.  The lender / broker would not be able to use a trusted appraiser for a home purchase or refinance transaction.  The appraisal would likely be ordered though an appraisal clearing house and would be farmed out to the next appraiser on the clearing houses list.  Like any other business there are good and bad appraisers but we would have no say in who did the job!  Appraisals are not an exact science and the same property might appraise by different people with as much as a 15% swing in value.  So your $200,000 sale could appraise for as much as $230,000 or as little as $170,000.

This could really throw a monkey wrench into your home buying or selling plans.

The only person who will unquestionably get a chance to talk to the appraiser is the LISTING AGENT.  The Listor will have an opportunity to present the most relevant sales data to the appraiser when the property inspection is done.  So, you home sellers should List your property with a Realtor who has excellent market knowledge and can help to facilitate the successful valuation of the home.   A top notch Listing Agent is going to be more important than ever if these proposed changes are adopted, so, you home owners who are ready to sell make sure you interview your agent to ensure they have a solid understanding of the value of your home based on relevant and recent sales data.  It may be the difference between getting your sale to the closing table or not!

In typical Michigan fashion, we experienced hail, rain, wind and bright sunshine all within an hour span. The weather did not prohibit all who turned out for today’s parade from having a great time.

I just realized I did not get any pictures of the Bassett Hounds! Next year…

For years now, we have been recommending that buyers have the sewer scoped during their home inspection period. For about $100, a guy named Dave and his colleague show up, head down the basement and stick a camera on the end of a long cable all the way down the sewer line until they hit the city pipes. When the buyer isn’t there, they make me watch it, or they make a video.

This week Dave found a sewer with a big sag in it in a house one of my buyers had under contract. He recommended that the line be replaced. That, among other things, was more than the buyer wanted to take on.

Birmingham, in particular, has negotiated some great savings on sewer replacement for it’s homeowners. If you are a Birmingham homeowner, be sure to call the city for information.

I was driving through the Rail District today and I saw two homes within a block of each other with freshly dug up front yard, a sure sign of a new sewer line.

As this week’s prospective purchaser wisely noted: “I would be really bummed if I had to spend eight grand on a new sewer. Nobody sees it. A new bathroom, now that is something different…”

A bad sewer does not have to be a deal breaker in a home inspection, but you should know what you are getting into.

HGTV recently aired a special program entitled “25 Biggest Real Estate Mistakes” which featured experts in all aspects of real estate: agents, mortgage lenders, home inspectors, flippers and stagers. The experts opined about the top reasons a listing lags on the market. Catch the full list here. Better yet, watch for a rerun on HGTV.

The usual suspects were included:

• overpricing the house,
• not providing easy access for showings,
• FSBO,
• overdoing the remodeling for the area,
• not marketing your property, etc.

The #1 Biggest Real Estate Mistake?? “Failing to Stage and Showcase Your Home.” This validates the home stagers of the world!

A quote from the HGTV website:

“When you are selling your house, you have to really look at it objectively and think about it from the viewpoint of the house hunter. Make minor enhancements to the house and maybe hire a professional stager to come and arrange your furniture. Staging is about decorating your house for the buyers’ taste, not yours. A great place to start is with the front of the home and the main entryway. Home staging is designed to increase the potential selling price and reduce the amount of time the house stays on the market.”

There you have it. Stage those listings! It is the most efficient and cost-effective marketing tool available to Realtors and home sellers.

Go Tigers!