Senate Bill 77, passed by both the House and Senate in the Michigan state legislature has been vetoed by Governor Granholm.  The bill would have allowed foreclosed properties in Michigan to maintain their Principal Residence Exemption (PRE)  for up to 3 years, preventing home buyers from having to absorb the higher property tax rate that results from the PRE being rescinded and thereby making it easier to sell foreclosed homes.

When a property has its PRE rescinded it results in a significantly higher tax rate (18 mills).  Buyers purchasing a home with a non-PRE tax rate are saddled with the higher tax burden until the their PRE rate goes into effect for the next tax year.  This means higher out of pocket costs to the buyer at closing and less purchasing power in terms of home value.  How so?  Lets say you’re a home buyer and are pre-approved for a $1200/month mortgage payment with an FHA mortgage loan.  A portion of that $1200 is for principal and interest on the loan value of the home you are purchasing, and the rest is for property taxes and insurance.  The higher the property tax rate on the home you are purchasing, means the more of that $1200 payment is going towards taxes and not the purchase price of your home.  This means you will either have to settle for less house, or pay more money per month.

Senate Bill 77 would have allowed home buyers to immediately file a Principal Residence Exemption upon purchase of a home. By vetoing this legislation, Governor Granholm has made it more difficult for buyers to purchase foreclosed homes in Michigan.  All other factors equal, buyers will prefer non-foreclosure homes when buying, and foreclosed homes will continue to sit vacant and further deteriorate in value, pulling neighborhood values down with them.

Home buyers, be sure you are working with a Realtor who understands the impact the Principal Residence Exemption can have on you and your ability to buy a home.

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“It’s a buyers Market” is the common theme in today’s real estate world. And while fundamentally true (mortgage interest rates are low and prices are low), there is the underlying issue of listing inventory…or lack thereof.  Simply put, buyers do not have a lot of great listing inventory to choose from right now. And the good listings that do come on the market, go pretty quickly.

To put the listing inventory into the context of raw data, consider the following:

  • Macomb county listings at the end of June of this year numbered 4833.  That’s down from 6190 just a year ago and around 8300 at the peak a few years ago.
  • Oakland county listings at the end of June of this year numbered 10,762.  That’s down from 14,802 just a year ago and around 19,000 at the peak a few years ago

Let’s consider a yard sale. A yard sale is a place to buy something  for a great price today that was worth considerably more a few years ago.  Sound familiar (Real Estate)?  If you think about it, our current real estate market is kind of like a yard sale on a Sunday.  Most yard sales run Thursday through Sunday.  On Thursday morning around 10am, yards sales around town are bombarded with bargain shopping vultures looking for anything and everything as long as it’s “a deal”.  The most valuable items at a yard sale rarely see the end of the day on Thursday.  Friday is not much different from Thursday in that anything remaining that is really of value gets snatched up by people who couldn’t make it on Thursday.  By the time Saturday rolls around and those who don’t have the luxury of hitting yard sales on Thursday and Friday make it out, it’s slim pickings.  And come Sunday, you’re wishing trash day was Monday because all that’s left might as well go to the curb.  If it’s still there on Sunday, it’s there for a reason…nobody wanted it.

About 18 months ago there was a lot of listing inventory on the market for buyers to choose from.  The federal and state governments then decided to start subsidizing buyers to purchase real estate and it set off a flurry of buying activity.  Like any commodity, the most valuable listings were bought first and quickly.  Over the last year and a half just about any house worth being bought has been purchased, and most anything left that’s been on the market for a considerable amount of time probably isn’t worth looking at.  And new listings that hit the market, desirable homes that are priced properly, will fly off the market in less than 30 days.  Yes, even in this market.

So what’s it all mean?

Buyers, you must have a firm understanding of your wants and needs and be ready to react quickly when a good listing comes along.  If you are one to drag your feet, look at a house multiple times and then spend a week thinking about it before writing an offer, you are going to get eaten alive in this market.  This is not to say you shouldn’t do your due diligence, but the market is very fluid. Your agent must understand this as well and put you in a position to act. If your agent does not have you plugged into the MLS, and receiving new listings by email as they become available, fire them immediately and work with someone who understands the market we are in.

Sellers, even though it’s a buyers market, you can take advantage of the lack of inventory and possibly sell your home faster, and for more money than you could a year ago.  If you have been considering selling, this is really not a bad time to be on the market. Contact me to show you how to get maximum value in minimum time.

Buyers and sellers, get your FREE access to the MLS by signing up for a Listing Book account at my website.

The home buying process is supposed to be fun. Exciting.  Something to be enjoyed.  In my experience most home buyers truly enjoy the experience of buying a new home.  It can, however, have it’s ups and downs along the way.  Losing out on your dream home to a higher bid,  or having to back out on a home purchase due to problems with your home inspection are problems that occur from time to time.  And while they may be a little disappointing to a home buyer, they rarely ruin the experience of buying a home.

I have found one of the quickest ways for a home buyer to grow frustrated with the home buying process is to spend hours online looking at home listings to get the list down to the most desirable listings that fit their criteria. The home buyer then spends another couple hours driving around with their real estate agent looking at the homes, only to find not a single prospect in the batch.

Sometimes you just can’t tell if a home is a good fit or not without seeing it. That’s understandable and to be expected. But oftentimes with just a few minutes of due diligence in front of a computer, a home buyer can get a better idea of how a home might line up with their needs, and might even be able to save time and frustration by being able to toss out listings without even looking at them…saving time and frustration.

I recommend buyers embrace the technology tools they have at their disposal, specifically mapping.  Room sizes, layout, granite counters, hardwood floors and finished basements are all important things to consider when buying a home. But so are location, neighborhood and surrounding areas.  All the premium upgrades in the world won’t matter much to a home buyer if the home backs up to a junkyard, or sits next to a Walmart, etc.  A quick check of the property address on a mapping program (I prefer Bing Maps at bing.com and use the Birds Eye View), can ensure the neighborhood and surrounding area meet your criteria before investing the time in going to see the house.

Here are some examples:

Make sure you don't mind Power Lines in your back yard before seeing this home.

Do you want your home to back up to I-94?

Gorgeous Backyard View of a...Strip Mall

Posted by: Brian Powers | June 2, 2010

What’s it REALLY mean when interest rates go down?

Mortgage interest rates have been a hot topic in the news recently, as rates continue to decline.  This can impact buyers and sellers in a couple of different ways.

The first for buyers is obvious. Lets assume as a buyer, based on your credit scores and debt-to-income ratio you qualify for a $600 per month payment (principal and interest only).  At the time of your pre-approval, interest rates were 5.5% which qualifies you for a  mortgage loan of $105,673 based on a 30 year fixed rate loan.  If rates decline to 5% that same $105,673 mortgage loan will carry a reduced payment of $567 per month, saving the buyer $33 per month.

Not bad. But an even greater benefit to the buyer can be the effect lowered interest rates have on a buyer’s purchasing power.  This morning I was talking to one of the mortgage lender’s on my team, Drew Sygit of The Lending Edge Team, and we discussed this very issue and looked at some specific examples.  Let keep with the original example above, with the buyer qualifying for a $600 per month (P&I) payment and a $105,673 mortgage loan based on a 5.5% interest rate.  What happens if rates go down to 5% and the buyer is comfortable keeping his payment at $600 per month? The buyer can now qualify for a mortgage loan of $111,769 with the same $600 payment.  That’s an increase in purchasing power of over $6000!

Let take it to a larger scale. A buyer qualifies for a $900 (P&I) payment, and with rates at 5.5% gives the buyer the ability to take out a $176,121 mortgage loan.  What happens to the buyers purchasing power if rates go down to 5%?  That same $900 per month now gives the buyer the ability to take out a $186,282 mortgage loan…an increase of over $10,000!

Any buyer in the market right now knows that the competition for the best listings is fierce. There just isn’t a lot of good listing inventory out there, compared to the last few years.  As a buyer, wouldn’t you like to have the ability to offer a little more for the home of your dreams instead of losing out to other buyers?  As a buyer you need to be working with a real estate agent who understands how a small decrease in something like interest rates can have a huge impact on your ability to buy a house.  If you’re a buyer in the market right now and it’s been a few months since you received your mortgage pre-approval, you could very well have the ability to afford a better home and not even know it.  I’ll also add that if your real estate agent or mortgage lender hasn’t discussed these things with you, it might be time to look at working with people like myself and Drew.  Professionals who will make sure you are the most well-informed buyer in the marketplace.

What about sellers? Think about the examples above.  When rates go down, it pushes more potential buyers up into your price range and your home becomes more marketable to sell.  With the recent reduction in mortgage interest rates, your home will have more appeal to the buyers in the marketplace than it did before rates went down.  If you’ve been thinking of selling, now might be a good time to consider putting your home up for sale.  If you decide to wait and rates go up in the future, it will have the reverse effect and you will have fewer potential buyers for your home.

Thinking of Buying a new home? Start your MLS search today by opening up a free Listing Book account.

Listing Book

Considering selling your home? Go to my website and sign up for free market analysis of your home so you know what it’s worth in the current market.

Posted by: Brian Powers | May 17, 2010

Thinking of selling your home? Act now or pay later.

An article in this mornings Detroit News quantifies the looming “shadow inventory” of foreclosed homes in southeast Michigan that banks are carrying on their books. Nearly 44,000 properties in Wayne, Macomb, Oakland, Livingston, Lapeer and St.Clair counties are currently being held by banks after taking the homes back via foreclosure.  In contrast, the current listing inventory for those same areas is a little over 30,000.

If you’re thinking of selling your home now, or in the near future these numbers should be a call to action for you.  As a seller, the less the supply of homes for sale, the better for your bottom line.  An over-abundance of supply of home listings will drive prices down and you will sell your home for less money.  Even with the recent expiration of home buyer tax credits, there are still many buyers in the market to purchase a home.

Selling before the “shadow inventory” hits the local market will save you thousands.  I do many consultations with homeowners every week to discuss the value of their home. Many are surprised to find that their home value is not as bad as it was a year ago. If you’re considering selling, get in touch with me so we can discuss the value of your home and see if selling now makes sense.

To get started you can call me at (248) 379-1750, or fill out a request form at my website.

I was reading an article in the Detroit News over the weekend regarding incentives that some builders and real estate brokers were offering to home buyers in an effort to maintain the momentum in buying activity in the housing market.  One such incentive that really caught my attention was Coldwell Banker’s Buyer Bonus Sales Event. The story, and even Coldwell Banker’s own website, hails the program as one that “extends the benefits of home buyer tax credits” after their recent April 30,2010 expiration.

I was curious as to how Coldwell Banker could offer up to $8000 to home buyers so I dug a little deeper into this program.  Coldwell Banker is not offering any bonus to buyer’s.  They are simply getting the seller of Coldwell Banker listed properties to offer a 3% credit of the purchase price back to the buyer at closing.

So what is Coldwell Banker really offering buyers?  They are offering nothing more than the traditional credits and concessions that buyer’s agents have always negotiated for on behalf of their buyers.  The only difference is they are getting the seller to commit at the time of listing to offer this credit.  And in the process, make the buyers in the marketplace feel like they are getting a special credit by purchasing one of their properties.

There’s nothing wrong with purchasing a property where this incentive is being offered, but there are some precautions a buyer should take.  The first is to ensure the property’s list price hasn’t been inflated 3% to offset this incentive the seller is offering to buyers.  The second, is for buyers not to get wrapped up in a gimmicky incentive like this and lose sight of the real reasons that make a home purchase a good deal for a buyer.

Buyers, make sure you are working with an agent who understands the real needs of you the buyer, and has the market knowledge to find the home that’s right for YOU, and for the best value for you the buyer.  And if you are looking at purchasing a Coldwell Banker listed property, be extra cautious that you aren’t over-paying to make up for this gimmick of a sales incentive.

Choosing a home to purchase for the wrong reasons can cost a buyer thousands and wipe out this 3% credit in an instant. Buyers need to ensure they work with an agent who understands this and has the marketplace knowledge to ensure they are getting the right home at the right price.

Posted by: Brian Powers | April 28, 2010

How well does your home show the first time a buyer views it?

By and large, buyers start there search for a new home online.  Most statistics have the number pegged in excess of 90% of buyers.  So in effect, when you have a home listed for sale, your first showing takes place without you even knowing it…online.

If your home shows well online it will lead to more buyers actually walking through your home to see it in person (and hopefully buy it!).

Sounds simple, but it is appalling to look at some of the listings in the MLS and see the total disregard that some agents have for taking appealing photos of the home that highlight is best characteristics.  Sellers deserve better and should demand more of their agent.

Take a look at the photos of a listing I came across today while browsing the MLS.  Is their anything appealing about these photos that would get a would-be buyer excited about the possibilities of looking at this home in person?

Nice house...but what's with the truck?

Just in case a buyer is wondering where the washer and dryer go?

I'm sure this is a nice bathroom, but 2/3's of the photo is taken up by the entry door, shower door and mirror. And nice reflection in the shower of yourself taking the photo.

Wow...the door opening to a closet!

Note to agent, when you stand in front of a mirror and take a photo, you are photographing yourself taking a photo. Also, thanks for verifiying there is nothing floating in the toilet.

Again with the mirror...but hey, at least the toilet is closed this time!

Sellers, you should never accept such laziness from your agent.  Make sure you are working with someone who understands that the first presentation of your home takes place online and showcases your home accordingly.

Feel free to contact me if I can be of assistance.

Brian Powers

brianpowershomes@gmail.com or (248)379-1750

Posted by: Brian Powers | March 23, 2010

Foreclosure rights often unknown to Michigan renters

If you’re currently renting make sure you understand your rights under the 2009 Protecting Tenants at Foreclosure Act. In the event your landlord loses the property to foreclosure you do have some rights and it’s important to know what they are.

Foreclosure right often unknown to Michigan renters

CHRISTINE FERRETTI
The Detroit News

Warren — Rebecca Papiez felt blindsided this month when told the home she’s been renting is in foreclosure and she has 30 days to relocate with her quadriplegic husband and three young children.

Until then, the 28-year-old tenant said she hadn’t received a call, letter or visit informing her of any problems with the Warren home near 12 Mile and Ryan, which has ramps and an open floor plan for her husband, Matthew, who uses a wheelchair due to a catastrophic work injury. The family’s $1,450-a-month rent had been paid on time for nearly three years.

The situation, relayed to the family by their property manager, seemed grim. But after briefly consulting with a housing assistance group, Papiez learned she should have at least until July to relocate under guidelines of federal legislation enacted last year.

The newfound knowledge brought some comfort, but Papiez still feels vulnerable.

“It relieved me a lot to know more about my rights,” she said. “He (the landlord) pulled the wool over our eyes.”

Experts say the family’s story is unfortunate, but it’s not uncommon: Tenants are often unaware of their rights when faced with foreclosure proceedings.

Jim Schaafsma, a housing attorney for the Ann Arbor-based Michigan Poverty Law Program, said the May 2009 Protecting Tenants At Foreclosure Act offers renters a little help in a state where their options are “sorely lacking.”

“Michigan has nothing other than basic protection that all tenants enjoy. There’s nothing specific to tenants in foreclosed properties,” he said. “It’s great for Michigan that there’s this federal law that offers them some protection, but it’s of little value if they don’t know about it.”

Under the act, tenants are entitled to 90 days’ notice from the new owner after the “redemption period” following a foreclosure sale. During the six-month redemption period, the borrower can redeem the property by paying off the amount owed. If not, the title goes to the new owner.

Still, the new property owner cannot legally evict tenants before necessary court proceedings.

Renters represent a significant but sometimes hidden portion of the population affected by foreclosure, according to local housing advocates.

Ted Phillips, executive director of the Detroit-based United Community Housing Coalition, estimates about one-third to half of their current clients are tenants of foreclosed landlords.

“The bulk of our work is not with tenants in foreclosure,” he said, “but we’re seeing a bigger increase in people coming through here because their landlord lost the property through mortgage foreclosure.”

Data released this month from RealtyTrac show 20,028 Michigan properties were the subject of foreclosure filings in February. The number is up 59 percent from the same time last year.

In February, foreclosures in Oakland County rose 71 percent from February 2009. Foreclosures in Wayne jumped 69 percent, and in Macomb by 53 percent, RealtyTrac data shows.

One pilot program, in Detroit is aimed at keeping renters and homeowners in foreclosed properties longer. By keeping homes occupied, the plan is expected to reduce blight and the vacancies.

The Retaining Occupancy On Foreclosure, or ROOF, agreement is designed to extend the amount of time a tenant or landlord can spend in a foreclosed property under controlled conditions with the new owner, said Mitch Meisner, a Detroit-based commercial real estate lawyer who helped draft the plan.

Meisner said ROOF would give renters an additional three months in the property after the six-month redemption period and 90 days permitted under federal law.

Tenants would be responsible for routine maintenance and basic utilities. They’d also pay an “availability fee” that would go into an escrow account to be split between the tenant and lender when the agreement terminates.

In Papiez’s case, documents show the landlord lost the home at a sheriff’s sale on Sept. 11 for $115,658. The landlord retained the right to collect rent until March 11, when the six-month redemption period expired.

“It just burns me that he could do this to a family with a disabled person,” she said. “It’s ridiculous.”

Additional Facts

Before you rent

  • Check for any outstanding taxes on the property with the county register of deeds
  • Look into the status of the property title; if there’s been a sheriff sale, it should be filed
  • Talk with neighbors. Find out who had been living in the home or apartment and what the turnover is like.
  • Consult with a housing advocate, attorney or counseling agency to learn the steps of foreclosure and your legal rights.
  • Changes are coming to FHA mortgage loans that will require home buyers to pay thousands more in out pocket costs when buying a home. The good news is you still have a few months to act before these changes take effect.  Being a well-informed buyer is critical to your success when purchasing real estate. Please read the excerpt below from one of my mortgage partners.  Contact me if you have any specific question on how these changes will affect you, or to get started in the home buying process.

    Want your own access to the MLS free of charge? Open up your Listing Book Account today.

    Those Who Wait Will Pay Thousands More This Spring

    Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

    Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

    Here are a few reasons why:

    On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

    Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

    There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

    Posted by: Brian Powers | January 25, 2010

    Home sales rose in ’09 as prices dropped 12%

    A large portion of the increase in home sales last year was propped up by government(tax) incentives for buyers. It will be interesting to see how the market reacts this year as those incentives dry up.  My concern is if the buyer demand for housing dries up, paralleled with banks releasing their bottled up inventories of foreclosures. The result could be a further recession of an already unstable real estate market.

    If you’re interested in seeing what your home is worth, go to my website (brianpowershomes.com) and sign up for a complimentary market analysis of your home.

    —————————————————————————

    Home sales rose in ’09 as prices plunged 12%

    December home sales down nearly 17%

    By ALAN ZIBEL
    ASSOCIATED PRESS

    WASHINGTON — Sales of previously occupied homes rose in 2009 for the first time in four years, despite a December slump that was due to a tax credit that had caused many buyers to complete sales earlier.

    Still, prices plunged more than 12% last year — the sharpest fall since the Great Depression. The price drop for 2009 — to a median of $173,500 — showed the housing market remains too weak to help fuel a sustained economic recovery. Total sales for 2009 were nearly 5.2 million, up about 5% from 2008.

    Concerns remain that the housing market will weaken after March 31, when the Federal Reserve is set to end its program to buy mortgage securities to keep home loan rates low. Once that program ends, mortgage rates could rise. Adding to the worries, a newly extended homebuyer tax credit is scheduled to run out at the end of April.

    The numbers “clearly indicate that the rebound in housing demand observed so far has been largely supported by government programs,” Anna Piretti, senior economist at BNP Paribas, wrote in a research note today.

    The poor December showing occurred after Congress extended the tax credit, easing pressure on buyers to act quickly. The credit of up to $8,000 for first-time homeowners had been due to expire Nov. 30. But Congress extended the deadline and expanded it with a new $6,500 credit for existing homeowners who move.

    December’s sales fell 16.7% to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said today. Sales had been expected to fall by about 10%, according to economists surveyed by Thomson Reuters.

    The report “places a large question mark over whether the recovery can be sustained when the extended tax credit expires,” wrote Paul Dales, U.S. economist with Capital Economics.

    The median sales price for December was $178,300, up 1.5% from a year earlier and the first yearly gain since August 2007. But some of that increase could be due to a drop-off in purchases from first-time buyers who tend to buy less expensive homes.

    Sales are now up 21% from the bottom a year ago. But they’re down 25% from the peak more than four years ago.

    A healthy real estate market is needed to help the economy continue recovering from recession.

    Last year, first-time buyers were the main driver of the housing market. But their role is shrinking. They accounted for 43% of purchases in December, down from about half in November, the Realtors group said.

    The inventory of unsold homes on the market fell about 7% to 3.3 million. That’s a 7.2-month supply at the current sales pace, close to a healthy level of about six months.

    Lawrence Yun, the Realtors’ chief economist, cautioned that the recovery will depend on whether the economy starts adding jobs in the second half of the year.

    Total sales for 2009 closed out the year at 5.16 million, up about 5% from a year earlier. And some real estate agents say they feel encouraged. More buyers are shopping around this month than in a typical January, said Kevin O’Shea, an agent with Homes of Westchester Inc. in White Plains, N.Y.

    “There are indications that the economy is coming back, and that makes buyers feel more secure to purchase,” he said.

    But many analysts project that home prices, which started to rise last summer, will fall again over the winter. That’s because foreclosures make up a larger proportion of sales during the winter months, when fewer sellers choose to put their homes on the market.

    Despite fears that home prices are starting to fall again, some analysts still say the worst is over.

    “We do not believe it is fair to consider this a double dip in the housing market,” Michelle Meyer, an economist with Barclays Capital, wrote last week. “The recovery is still under way but hitting some bumps in the road.”

    http://www.freep.com/article/20100125/BUSINESS07/100125021/1322/Home-sales-rose-in-09-as-prices-plunged-12

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