Real Estate in Birmingham, Bloomfield Hills, Beverly Hills, Royal Oak, Troy and Oakland County

I spent much of this week with my head blissfully in the sand.  While others fretted about stock market losses and the failed housing market, I just kind of failed to tune in.

Crazy words, I know.  I am hardly apathetic and I tend to be pretty well informed.  But this week, as the sky fell around me, my life just went on.

That is not to say I won’t be impacted.  Like most people, I lost a lot of money on paper.  I don’t know how much and I probably will not open my brokerage statement this month. Or next month… My nest-egg got smaller and my borrowing ability shrank with the tightening credit market.

But in my small world here in Metro Detroit, I am still seeing houses sold.  Selling houses in Metro Detroit is actually my BIG world, something I do every single day, all day.  I went about my business and added to the “sold” statistics for 2008, which, by the way, are up over 2007 YTD.

Really, keeping about our business is what most of us should be doing instead of freaking out.  Your home might be worth less.  If you weren’t planning on moving soon and you don’t need to refinance then you won’t feel the bite imminently.  You might even see a future reduction on your property taxes.

Fundamentals for Today’s Oakand County Home Seller

This is a market ONLY for serious, committed sellers.  That means your house is priced right and marketed exceptionally.  Priced right means it will be perceived by buyers to be a better deal than the other things they see in that price range.  I have not talked to a buyer in the last 2 years that is not focused on the deal. They all have different ways of articulating it, but in the end, at a minimum they want to do what they can to make sure they are making a decent investment when they buy.  At a mximum, they want to feel like they got a bloody steal.

This week I heard of buyers who were dropping their intended offers by as much as $100,000 in response to global economic issues.  If you are a seller you need to be prepared to hear things like:

• Your house is not worth what you paid for it
• Your house is not worth what the taxman has told you it is worth
• Your house is not worth ANY refi appraisal you had in the last decade
• Your house is not worth more than all the other houses in the neighborhood
• Your house is not worth what it was worth 6 months ago.

That last one is important.  Most of our listings this summer were sold in 60 days or less, so I have lots of proof that correct pricing and exceptional marketing works. In some segments of the Metro Detroit market, the average days on market is close to 3 years.  In many of those cases, the sellers are not responding to the changes in the market and by leaving their home prices too high, they are making their homes nearly Sale Proof.

Chasing a market down does not work.  You have to be slightly ahead of the market to get the deal.

If you are selling a Meto Detroit home, you can’t be an ostrich.  Sorry.  You have to pull your head out of the sand and either get your house off the market or do what it takes to get it sold.  There ARE buyers out there and you can count yourself amongst this year’s sold statistics if you follow the right path.

Coming next: Observations about today’s buyers.

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The big news this morning is that the Federal Reserve Board moved to lower the federal funds rate overnight by ½%.  Five other central banks around the world also lowered key lending rates in a concerted effort to loosen up lending and pump money into the banking system.

Of course, we’ve all heard about the $700 billion program, passed by Congress last week, to “bail out” US banks.   The purpose of this legislation is to allow the federal government to purchase problem assets from banks to add liquidity to the banking system.  One of the key things that happened to create the current problems in the US financial system is the lack of liquidity in the mortgage backed securities (MBS) market.  Due to higher than normal foreclosure rates in mortgage portfolios investors have been unwilling to purchase new and existing MBS.  Many banks have large portfolios of mortgages and MBS and the frozen market for these assets has forced banks to have to write-down the value of these assets.  These write-downs have created huge paper losses and that combined with banks inability to sell mortgage assets has created a contraction in lending and a liquidity problem at banks – they simply don’t have enough cash to make loans and meet capital requirements.

This fed rate reduction combined with the government bailout plan and other recent moves are all reaching towards the same goal – to increase liquidity in banks and foster an environment in which banks can and will make more loans available to consumers and businesses and thus stabilize the financial systems and the overall economy.

I also wanted to let you know that we are still making loans, getting people approved and closing deals!  I am working with a whole bunch of first time buyers right now who are seeing great opportunities in this market and you don’t have to have perfect credit and a 20% down payment to get in the door.  The FHA loan is back and is filling in the gaps with loan amounts up to $297,500 (in Southeastern Michigan), credit scores as low as 580 and only 3% down.  We still have great Jumbo ARM rates for people taking advantage of super deals in the luxury market.  When you want to ensure that your Pre-Approved clients get to the closing table successfully just give them my card.

For all of us in the real estate and mortgage world, these are challenging times.  However, it’s my opinion that when the smoke clears we are going to enjoy a great market with a lot less players in the field.  It’s just a matter of keeping your chin up, your attitude positive and working hard.  Be one of the survivors and I guarantee you’ll be glad you did!

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I guess the ex-Mayor of Detroit isn’t planning on moving to his Tallahassee Florida home any time soon (even after he finishes serving his time in jail). The 4 bedroom, 3 bath home that the Kilpatrick’s purchased in June of 2007 for $430,000 is currently on the market for $399,900 with Gary Bartlett, a former television news anchor turned Realtor.

As a Realtor, I was just musing about what might happen if an offer comes in while KK is behind bars?  I can just hear Gary Bartlett saying to the other agent, “Well, it might take me a few days to get back to you with a counter offer.  The next time my client’s wife can visit him in jail to get anything signed is Friday.”  That would certainly make for an interesting transaction.  Of course, they will take care of such things with a Power of Attorney, but, still, I had fun musing.

Today’s Detroit News had an article about how happy the neighbors in the Detroit neighborhood surrounding the Manoogian Mansion were  to have the commotion that came along with having the Kilpatrick’s as neighbors a thing of the past.  Certainly the Tallahassee neighbors have been affected to a much lesser degree, though they might be hopeful that a full time resident will purchase the home.

Wondering if the proceeds from the sale, if their are any, will be used to pay off the $1 million Kilpatrick owes in restitution?

Photo from Gary Bartlett.com

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As a home stager, I am called by real estate agents and homeowners to help prepare their properties for sale. While it is impossible to say how long the house would have taken to sell had I not been involved, I firmly believe that the changes implemented have made a difference in the DOM.

I could quote national statistics of staged vs. non-staged houses, but I don’t think they translate to Michigan or accurately reflect our real estate market. Things are a little different here in The Mitten. My fellow local stagers, across the board, have all reported good results with the properties they have staged. I can say with great confidence that staging works.

So, why aren’t more houses staged?

As I look around at all of the “For Sale” signs in Oakland County, I ponder this question. Is it fear of the unknown? Are people still unaware of home staging? Are real estate agents simply confident in their ability to tell sellers what must be done to sell? Are sellers afraid of stagers touching their “stuff”? Is there a misconception that staging is expensive and only for high-end houses? Are sellers non-believers? Are agents?

So, in the interest of full disclosure, here is a list of “wills” and won’ts” when it comes to staging.

A good home stager WILL:

• De-clutter
• De-personalize
• Organize
• Explain why we’re doing what we’re doing
• Edit furnishings down to the minimun needed in each room
• Re-purpose and work with what you already have
• Suggest specific accessories if augmentation is needed. Most will be able to rent to you from their own inventory for a nominal monthly fee
• Make the house look as up-to-date as possible
• Accentuate the focal point of each room
• Maximize positive features and minimize flaws
• Identify problems that need attention, such as cracks, water damage, unfinished projects, burned-out bulbs, odors, stains, worn hardware and fixtures, etc.
• Improve traffic flow
• Suggest neutral paint colors
• Create a warm, inviting feel that buyers will respond to
• Pump up the curb appeal
• Determine correct artwork placement
• Be the “bad guy”, since most sellers take suggestions better from an objective third party
• Refer sellers to trusted painters, handymen, cleaners, storage facilities and contractors
• Arrange for rental furniture if needed
• Improve every house, regardless of price, location or condition
• Treat your belongings with care
• Work WITH the agent to get the house sold
• Understand and respect that selling is an emotional process
• Be your biggest cheerleader and root for a quick sale

A good home stager WILL NOT:

• Hide problems by covering them up
• Berate your design choices
• Pretend to know if your house is priced correctly or being marketed well
• Charge you an arm and a leg for staging. If you have a budget limit, TELL US! We can suggest many low-cost or no-cost remedies that will help the property show better
• Use sub-standard garage sale furniture in your house (yes, I have heard this is a concern!)
• Be a go-between with your ex (yes, this has happened also)
• Throw anything away without your consent
• Sugar-coat the truth
• Second-guess the agent’s advice
• Clean the house, other than any messes we have made (i.e. we don’t do windows!)
• Insist that you install granite or gut your bathroom
• Dismiss your concerns
• Stop staging until your house looks it’s best

I hope this gives readers a better view of a home stager’s role and clears up any misconceptions. Getting the house sold is our #1 priority, and we will do whatever we can to that end. We have a passion for the job. Otherwise we wouldn’t put our bodies through the wear and tear of staging! For those that have been unsure or afraid to use a stager’s services, what not give it a try on your next listing? You just may become a believer too.

Go Tigers!

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In a historic move yesterday, Treasury Secretary Carlson announced the government takeover of Fannie Mae and Freddie Mac. The two financial giants have been struggling over the past year due to an unprecedented increase in foreclosures which relate to falling home values and the subprime loan meltdown. If the two were allowed to fail the results would have been catastrophic.

Fannie and Freddie are the most important conduits involved in mortgage lending. They purchase or guarantee more than one half of all mortgage loans made in the U.S. – almost $5 trillion. Lack of confidence in these entities this year has resulted in a steep decline in demand for the mortgage backed securities (MBS) created when mortgage loans are made. This weak demand has caused mortgage rates to remain higher than they otherwise could be and higher mortgage rates are not helping the ailing housing market.

This year we have also seen a huge increase in fees that Fannie and Freddie have introduced to offset losses. A whole new rate structure was introduced whereby anyone with a credit score under 720 was charged a higher rate and the rate kept going up the closer you got to a 620 score. In the past, any borrower who was approvable within conventional guidelines got the same rate regardless of credit score. There is some hope that the government will reduce or eliminate these fees allowing more borrowers to be approved at lower rates.

Overall, this move should help to reduce interest rates on conventional loans and attract more buyers into the housing market. I can tell you it’s already working in terms of lowering mortgage rates as the 30 Year Fixed rate declined from 6.5% on Friday to 6.0% today. That’s over a $65 decrease in the monthly payment on a $200,000 mortgage!

The purpose behind this takeover is to improve confidence among investors who buy MBS, to ensure the continued viability of the U.S. mortgage market and to help ease the worst decline in home prices since the Great Depression. Let’s hope it succeeds!

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A recent client wanted a completed NEW home in Birmingham.  With a budget of $2,000,000, one would have thought we would have had plenty to chose from.  We did not.

Spec building in Birmingham, and throughout Oakland County, has almost come to a stop.  We are still seeing a few spec homes going up around town, but not many at all.  Most builders are holding off starting new projects, with a few exceptions.

One prominent local builder told me that other builders are having trouble getting lines of credit for construction.  Many of those who have access to cash are risk averse, and not building specs, reserving their work. Anyone who has lived here more than a few years will notice that there are less construction sites throughout the city.

In some ways, this is a good thing. It will help some resale home sellers who might have lost a buyer to new construction, but did not have that option. As the inventory of resale homes diminishes, that can put supply more in balance with demand. Eventually prices will start to head back up, and builders will start building again.

Personally, if I were a savvy builder, I would be looking to acquire land, even if I did not plan to build this year. There are some super values out there, and if the property is rentable it can have a decent positive cash flow for a while.

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Sophie was selling her drawings at the Blueberry Festival in Paradise, Michigan. That is up at a northern tip of the UP for those of you who have never heard of Paradise.

For me, Sophie was the highlight of the day. She actually sold out of drawings while we where there.

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In the last few weeks, Marianne Sweet and I have had a couple of quick success stories. I called in Marianne on two new listings and asked her to do her magic.

In one case, the home had been on the market previously with another agent, and had not sold. It was a lovely home, but the seller and his wife were frustrated with the lack of a sale. Marianne came in, made a few changes, and in about a month the house was under contract. Yes, we made a price adjustment too, but a review of the comps and the lack of a sale during the previous listing period told us that some changes needed to be made.

The next home was a condo in Royal Oak. I was the first listing agent and we got that one sold in about 30 days (or less) too. This in a market where the absorption rate is about 2 years for condos. We were up against stiff competition to get the listing in the first place. The seller really did his homework, bringing in 3 agents and stacking up their marketing plans and experience before he made his choice. I always like being competing for a listing. I think we have a lot to offer, and when a seller goes to the effort of bringing in a couple of agents, then they really see the difference.

Any, at closing, the seller gave me the ultimate compliment. He was thrilled with the quick sale, close to asking price and he said,

“You told us exactly what to do, and it worked!“

What had I told him to do?

Marianne is headed out again this week to do her magic on another new listing. I am hoping that we will soon be reporting another quick sale, this time in the Village of Franklin.

People keep whining about how difficult this market is. I don’t deny that it is extremely challenging to be a seller in Southeast Michigan right now. But there are many things a seller can do to get a sale. Get a listing agent who will guide you, take her advice, and you may just find yourself moving much sooner than you ever thought you would.

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Ken Mascia’s recent post on the Mortgage Relief Act resulted in some good questions about exactly what the new law does for home buyers. This week Ken was even featured on the front page of the Oakland Press, where he further opined on the topic. We are always delighted to see Ken’s name in the paper.

Everyone heard about the $7,500 credit, but there are some important caveats that you need to be aware of. The most significant being that the tax credit is actually a 15 year interest free loan. That means you pay it back over the course of the 15 years. Still, that’s not at all a bad deal. I would take it in a heartbeat if I were eligible. Free money for half of the life of an average mortgage is s-w-e-e-e-e-t! I promise you, you will not find a similar offer from Countrywide or Chase.

Here are a couple of super resources for direct answers to the questions you may have about the credit as a first time home buyer.

From the National Association of Realtors:

If you bought a home since April, you may be eligible for this credit. If you are thinking of buying a home, this might help to make that decision a little easier. If you know someone who is buying a first home, pass this along to them. Better yet, have them call me

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Metro Detroit has it’s own celebrity foreclosure. It might not attract national media attention like Ed McMahon, but then we already have Mayor Kilpatrick garnering the spotlight from late night talk show comedians, so what more could we want?

Wayne County Prosecutor Kym Worthy is doing a short sale on her home. Personally, I don’t think this would even be newsworthy if she didn’t happen to be heading up the case against Kwame Kilpatrick. Perhaps the Mayor’s office slipped this tidbit to the Freep so that they would take the heat off of Kwame for a day or two, and to shake up Worthy just a bit.

I have no information about Kim Worthy’s foreclosure. Frankly, I think I would be hard pressed to find a neighborhood in Southeast Michigan right now that has not been touched by foreclosure and short-sales. We’ve seen multi-million dollar homes go through foreclosure. In fact, this summer we listed and sold a foreclosure in Birmingham that had been listed for $2,000,000 at one point.

Worthy has a good job. She makes over $150k a year. Yet something happened that is not allowing her to pay her bills. No judgment from me–I am sure there is a good reason. Medical bills and messy divorces often leave people in financial dire straits these days.

Ask anyone who has been through the short sale process as a buyer or as a seller, and they will tell you it is painful. Worthy is losing her home. Her credit is messed up. It will be messed up for a while. On top of that, she is in the midst of preparing for THE CASE of her career. I don’t envy her right now.

I wish her the best and hope she can focus on making sure that she represents the people well in the case against Kwame Kilpatrick.

Photo by SparkyO5

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As if the buffet in the back corner of the yard weren’t enough, these little buggers have ventured onto the patio, eating impatiens, petunias, lilies, Black-Eyed Susans, hostas and begonias.  They plucked the buds right off the rose bushes.  No home stager in the world could make these gardens look appealing!

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