Livingston County Sales Figures – January to June - 2010 vs 2011

Single family residences (SFR) sales (detached homes) are down about 10% for the first six months of 2011 as compared to 2010. The bright spot is that both the average and median sales prices are showing nominal increases (3-4% margin), and are selling slightly faster in 2011 than in 2010.

Private sales (non short sale, non bank-owned) are up over 9% from 2010, but the overall decrease quoted above is heavily impacted by an almost 21% DECREASE in bank-owned home sales. The bank-owned sales are also selling for 6-10% less for average and median sales prices compared to 2010 and those that are selling are going about 5-6% faster than last year.

It appears to me that sellers who WANT to sell and have not been under pressure to sell may have tired of waiting for the market to improve. I know that I have had conversations with consumers that have another home, and while they can continue to make payments on both, are deciding to make the move to their next destination. Sometimes it’s for retirement, other times to be closer to family. Those of us that work with banks to sell foreclosed upon properties have definitely recognized that the supply has decreased.

Condo sales seem to be increasing in both average and median sales prices, and they are generally selling faster than last year’s pace, too. There is a 10% increase in bank-owned condo sales, but the short sales are down by over 26%. I’m not sure if that’s a sign of frustration with the short sale process (and it can be VERY frustrating), or if there are more ‘strategic defaults’ in that group of property owners.

The Real Estate market continues to change. If you’re considering either a purchase or a sale, make sure you work with a full-time Real Estate professional that is watching trends and market dynamics.

Quicker Lender Response To Short Sales Near?

Reps. Tom Rooney (R-Florida) and Robert Andrews (D-New Jersey) have introduced a bill that would give lenders a 45 day deadline in which to render a decision on a short sale offer, according to an article published today by DS News. The National Association of Realtors (NAR) is supporting this effort.


Nationally, short sales account for 13% of recent home sales. The Prompt Decision for Qualification for Short Sale Act of 2011 still has not been referred to a committee. Hopefully that will happen promptly (pun intended) since short sales are often the brightest ray of hope to homeowners that are facing foreclosure.

DS News is a source of breaking news and up-to-date information for the default servicing professional.

You can read the entire article here.

Great News For Buyers!

Legislation supported by the Michigan Association of Realtors (MAR) to allow foreclosed properties to keep their principal residence exemption has passed the House & Senate. This important legislation is expected to be signed into law by Governor Granholm within days.

The high number of foreclosed properties on the market lose their homestead exemption and cost buyers, often new homeowners on a tight budge, a lot of extra money in property taxes. This means they can qualify for lower overall mortgage amounts, and since these buyers often have tax escrows, an have a lower monthly payment, too.

For full details, read the entire legislation at http://legislature.mi.gov/doc.aspx?2009-SB-0077

Shadow Inventory Going Up

A November 22, 2010 report from CoreLogic states that pending supply (shadow inventory) of homes is up more than 10% (2.1 million vs. 1.9 million units) from a year ago. So what, exactly, is ‘shadow inventory’ and what does it mean to us?

Shadow inventory has a couple of parts. The first part is lender foreclosed upon properties that are not yet on the market. We know that the rate of foreclosures is unfortunately ‘robust’, but we’re not seeing those properties hit the market. Hence the term ‘pending supply’. The other part is an estimate based on seriously delinquent home loans. In this case that means homes that haven’t been foreclosed upon, but are 90 days or more in arrears. The likelihood of many of them reaching foreclosure is high.

The bad news for Michigan is that we have one of the highest levels of ‘distressed months supply’, or a high ratio of properties that are 90 days or more delinquent to the supply of total housing inventory, homes that are listed and available to consumers.

If lenders let these ‘pending supply’ properties onto the market in a short time frame, the fear is that housing prices will plummet even further and faster than what we are currently experiencing. That is not good for them or for the economy in general.

It is possible that some of the seriously delinquent homes will be sold as ‘short sales’, and it’s also possible that some home owners will find other ways to avoid foreclosure, but the trend is disturbing. For buyers, this reinforces that it is a good time to buy, especially with the record or near-record low interest rates. Sellers that do not have a strong reason for selling may want to hunker down and try to ride this out, but all industry expectations are that we’re in for a long, bumpy ride to get back appreciating home values.

CoreLogic is a leading provider of consumer, financial and property information, analytics and services to business and government.

The full report can be found at:
http://www.corelogic.com/uploadedFiles/Pages/About_Us/News/CoreLogic%20Shadow%20Inventory%2011-22%20FINAL.pdf

Investing In Real Estate Seminar

Preview Properties is hosting the above seminar on Wednesday, January 20, 2010, at 6pm at our office on Brighton. Curious about investing in Real Estate? This program will give you an opportunity to hear from Real Estate professionals about the pros and cons of this investment strategy.

Preview Properties is located at 130 W. Grand River Ave., Brighton, MI. RSVP to Lisa at 810-220-1505.

"Free Foreclosure Lists"

Wow, every Real Estate office that I pass has a banner, marquee, or sign claiming the above. Just stop on in and pick it up. Since I deal with a large number of foreclosures as a listing agent, I thought I'd share a couple of thoughts.

I get calls every day for foreclosed listings that sold two to four weeks ago. They're definitely not being found online. Are offices not updating these lists or are consumers picking them up and letting them sit for weeks before they act? Hard to say, maybe some of both.

If you are interested in foreclosures, here's a few other thoughts. First, properties under $80,000 go very, very fast. If they're financeable, that is in good enough shape, they're absorbed quickly. In general, a lot of homes under $50,000 cannot be financed because they need too much work. Unless you are getting a rehab loan or a construction loan, you'll need to buy cash.

Are you handy? If you are, the above example is OK. If you're not, what good is buying a $20,000 house if you have to hire out all of the work to make it habitable? You might as well spend more on a home that can be financed and perhaps needs only re-decorating. Will you live there yourself or rent it out? Maybe it's a home for an older child. All are OK, but know your strengths and plan accordingly.

Of course, I am biased as a Real Estate Professional, but unless you have done a lot of buying and selling on your own, I strongly recommend that you work with an agent of your choice. They will help you refine your plan, get you listings that are appropriate and guide you through the buying process.

Remember, you have to know what you can handle in terms of repairs and expenses. If you're looking at the low end of the price range, you have to be prepared to act quickly or lose out to another buyer. I am amazed at the number of people buying under $50,000 homes for cash. Your best bet for a successful purchse is to work with a real estate agent that knows bank owned property procedures.

Thoughts On Livingston County Real Estate

1. It's getting harder to get deals closed. I've had three deals this year where the buyer's bank folded within 5 days of closing. That means they have to get approved by another lender which is usually not a problem. But two of these three were also using the Dept of Agriculture's Rural Development Program. It's a great option for buyers that qualify based on income. 100% financing, no PMI - what a deal! But it's so popular in my area that the backlog to process has grown.

Banks usually give you a 45 day window to close on a foreclosed property. I've had to get extensions because of Rural Development processing delays. Most of the time that means a $100/day charge to the buyers and one deal fell apart because of that extra cost (20 days x $100/day=$2,000 more).

If you're near to closing, you're likely at 30 days already. If your lender shuts its doors (or the precursor of not taking any more mortgage applications) and you have to switch, it's a real challenge. You find out who the good loan reps are when you get into this kind of situation.

2. Prices are still dropping. Let's face it. Buyers rule. It doesn't matter what the appraisal says a house is worth. You have to price a home well enough to get a lot of buyers through it. When it gets to the right price you get a good offer, or even multiple offers. Some buyers are unrealistic in their (lowball) assessment of value, but those that are tired of looking at homes that need a ton of work will pay a higher price for an updated, well-maintained home. It may still not be at the full appraised value, but it's usually not unrealistically low. A well-motivated seller will make it happen in most cases.

3. Sales numbers are still pretty robust although the average and median prices are dipping due to the high number of foreclosed homes on the market. I've sold quite a few properties under $80,000 this year. many were not in horrible shape and were bought by parents for their young adult children. The plan is usually that the child will rent the home. If they decide to buy on their own in the future, the can work with the parent to buy that home or go out in search of a larger place on their own. The parent still has the property to generate rental income.

Random Thoughts on Listing Foreclosure Homes

Sure, it's not all bad. But agents listing bank-owned homes work a lot harder on these transactions than you might think. We often have to get utilities on in our names, and pay for lawn and snow maintenance. Here's a few things that happened to me in the last week.

First. An agent called that a lockbox was 'frozen' at one of the condo listings I have. It just wouldn't open. Weird, I thought. Sure, there's no screen door and it's been snowing and really cold, but still. I grabbed the extra set of keys and went over. Hmm. No lockbox. And my keys don't work. What's up?

The Asset Manager for the bank didn't know, either. I called the property management company that the bank assigned, told them the story and they went out to check. They called back and said they couldn't get in either. Locks changed, new lockbox installed and access re-established, though. So I went over, grabbed the extra set of keys and found my old lockbox inside the door. I couldn't figure out what happened.

Then a call from the Condo Association. They were afraid the unit would 'freeze', so they changed the locks to get in and made sure it was winterized. Aagh! All of that for naught. They could have called me and I'd have given them the code to get in. I lost three showings in this little episode. But all is well now.

Second. A showing agent called to report that the door was found closed but unlocked on another condo listing I have, and that she tried to lock it when done, but couldn't get the lock to catch. Drive down there to find the door is out of plumb (bad hinge) and you have to really lift and pull to get the lock to catch. (I mean really, really lift and pull.) I got it to lock and had to make another trip with my tools to tighten the offending hinge.

Third. Agent calls after a showing a bank-owned property. It's a different kind of lockbox that the property management company is using. When the code was entered, the lockbox unlatched form the door. There's a reset lever in back and somehow when re-attaching it, she changed the code to an unknown 4 digit combination and couldn't get it to open to get the keys back in. We arranged a hiding spot for the keys, and I dashed into the office to get a new lock box, take it to the property and put the keys inside. Just when I was planning to sit down with a nice glass of wine and a good book. Oh, well.

Things I've found useful to carry around in my vehicle for foreclosures. Duct tape, clear strapping tape, disposable painters (paper) masks, a 5-cell flashlight and a battery powered lantern, miscellaneous sized pieces of wood to secure door walls or sliding windows if they don't lock, a canister of alcohol-based hand sanitizer, wet wipes and a couple of clean rags. And always carry a pair of work boots, too. Now I'll make sure that I have one or two extra lock boxes with me. And I guess I'll keep my cordless drill and bits in the car, as well. (I could have cut one of the trips out of number 2, above, if I had some tools handy.) In the movie Jaws, Chief Brody has a line that goes, "We're gonna need a bigger boat". If this keeps up I'm gonna need a bigger car.

Selling agents, when you're offered bonuses on foreclosure properties, I really am happy for you. I wish that the banks would understand that the listing agents deserve a little extra, too. We're listing agents, property managers, and in many cases we're acting as general contractors, too, since we have to manage bids, repairs, and re-inspections on some of these properties. It seems like more and more lately.

Oh, and next week I'll be managing the repair of a property that has a foot of water and ice in the basement. No lack of challenges there.

Howell Condo Market – Buyers Market!

Whether you’re a Real Estate Professional or an interested consumer, you’ve likely noted that the condo market is glutted and has more potential deals than the larger total housing market.

Looking at condominiums that are located in the two Howell, MI zip codes (48843 and 48855) we can see how badly condos are faring in the current economy.

In calendar year 2007, there were 55 condominium sales recorded in the RealComp MLS. They showed an average sales price of $127,756, a median sales price of $120,000, and a total sales volume (total sales dollars for all 55 sales) of $7,026,554.

In 2008 (through 12/14/08), there were 48 sales with an average sales price of $85,543, a median sales price of $82,950 and a total sales volume of $4,106,053.

These are tremendous one-year drops in value by any standard. The average sales price is down 33%, the median is down almost 31% and the sales volume has dropped over 41%! To make it worse, with 214 units available in these areas right now, there is over a 53 month supply of condominiums (214 available divided by 48 sales this year for 12 months, or an average of 4 sales/mo).

Foreclosed unit sales in this area have tripled, from 6 in 2007 to 18 in 2008.

New construction has essentially stopped, and some builders/developers have either lost unsold units to foreclosure, gone bankrupt, or both. Homeowners in some condo associations are having a myriad of issues to handle, too.

If the development has not had enough units sold to invest the residents as Association Board members, the developer retains control. Some Associations are finding that while they’ve paid their monthly dues, services are not being performed (snow plowing, landscaping) because there’s not enough money in the fund.

Developers often base the starting dues on a certain number of sales per year and a maximum build out time. They may even stipend some of the early costs to get new sales in their communities. When the sales stop and there are many units left to build, it’s bad for everyone.

Built-out, established communities are also grappling with the loss of monthly dues due to bank-owned properties. When a condo goes into foreclosure, those dues stop (often dues are one of the first payment to be deferred when owners get into financial trouble, even before foreclosure). If your association is working on a tight budget and the number of foreclosed properties keeps climbing, it can really hurt the whole community. Banks do pay these back dues at closing, but it certainly creates a short-term budget crunch for the association.

There are definite deals out there in the condo market, but remember to do your homework before you commit yourself. If you’re considering a unit in a development that has a lot of empty sites, be extra careful. Once you analyze the Association budget, it may still be worth pursuing, but make sure you’ve got as much information as possible on which to base your decision.

Market Observations For Howell Zip Code 48843

For homes in the Howell zip code 48843 (basically the Howell area south of M-59), there are some interesting contrasts between 2007 and 2008.

The total number of homes sold are pretty close, 370 in 2007 (through 12/31/07) vs. 378 in 2008 (through 12/4/2008). The fact that the total number of sales has remained pretty constant is a good sign by itself. With lenders getting tougher on loan requirements, required down payments and more underwriting scrutiny it shows that there are still buyers out there looking for homes - and they're able to buy!

If we look at just the foreclosed (also known as bank-owned or REO) homes, the picture is more grim. In 2007, there were 47 bank-owned home sales of the 370 total, or about 13%. For 2008, we’ve seen 115 bank-owned home sales out of the 378 total, or 30%. That’s more than double last year’s rate and this year’s data is not complete at this point.

The median price dropped from $209,750 to $170,000 (a 19% reduction) for those same time periods. That’s a huge drop in value, undoubtedly influenced by the higher number of foreclosures. But there’s also the fact that owner-occupied homes are dropping in price, too, as the entire housing market loses value.

The time to sell a home went down– from 145 days in 2007 to 134 in 2008 So, homes that sold did so about 8% faster in 2008 - a small bright spot, anyway.

If you absolutely have to sell, expect to take a hit from what your home was worth 2 years ago. At least 20%-25% is not uncommon, and it may be even more.

REO Fallacies – Part 1

I’ve been doing a lot of REO (Real Estate Owned) properties for about two years and I encounter many misconceptions by consumers – at least from my personal experiences in dealing with bank-owned (foreclosure) properties.

First, the bank will take anything to dump a home. This is absolutely not true in most cases. (Of course, the borderline tear down is the exception.) If you’re offer is at 80% or less of the list price it will likely be rejected outright. If you’re asking for seller contributions towards closing costs, you’d better bump that price up a bit, too.

While banks don’t want to hang onto these properties, they’re just like you and I – they want the best price that the market will bear, based on condition, amenities and the like. Banks price homes in different ways, but they usually get at least two Realtor® evaluations (called Broker Price Opinions, or BPOs), and sometimes a full appraisal, too. When they list a property at a certain price, they’re fairly confident in that value.

Second, if you’re putting in an offer on a house that hasn’t been on the market before, you’d better go in close to full price for the first few weeks. Some Asset Managers will not take less than close to that amount for the first 2-4 weeks. Prices typically get reduced monthly, based on the listing agent’s Monthly Status Report. Asset Managers pay careful attention to local market trends (housing values, unemployment rates, etc.) when deciding upon a pricing strategy and the amount of the reductions.

Third, most banks have already priced the home for its condition. Sure, all of the appliances are gone, and maybe some light fixtures, too. It could have a few holes in the wallboard or carpet that is badly stained. That’s been rolled into the original pricing. If you’re on the edge with what you can afford, don’t expect the bank to bend over backwards for you to get that extra few thousand dollars to meet your pre-approval price point.

Remember, that may have been what happened to the prior owners who just lost the house – they became over-extended. As one Asset manager told me in an email that recently accompanied an offer rejection, “I can't help if they do love the house, they absolutely need to purchase something they can afford and this one they cannot, sorry.” Ouch!

More discussion in later posts, but remember that you buy these homes ‘as-is’, so be sure to get inspections done and carefully consider what you are trying to buy. Expect to pay a licensed plumber to de-winterize the home to check out the plumbing (around $100) and then to re-winterize it (another $200). This is over and above the cost of the inspection itself.

If you have questions about both the benefits and pitfalls of buying a foreclosure property, feel free to contact me.

Random Thoughts About Buying Foreclosures

(c)2008 Robert Smith
There's no doubt that there's a lot more foreclosure properties on the market and a lot more of them are selling. This post isn't as structured as most of mine are, but here are some general observations I've made on buying foreclosures over the last few weeks.

First, look at how long a property has been in the MLS. I've seen some lenders refuse all but full price offers in the first two weeks of a listing. Why would they do this? To make sure it's priced right, or perhaps to try to spur multiple offers to get two buyers competing against either other. The number of showing a property receives in the first two weeks will tell if it's priced right. And they don't care if it's a cash offer or a mortgage-backed offer, either.

Second, when looking at the lower-end priced homes in a given area, you aren't going to be successful bidding ridiculously low. In my market area, for example, homes at $115,000 or less will probably sell within $5,000 to $7,000 of list price. It really is a waste of time to write that offer for $75,000, folks. Unless, of course, the home needs total rehabilitation, but then you have to re-add those costs into your 'project' scope.

Third, banks aren't trying to give away these properties. They are willing to wait. And if they don't sell they'll often put them up for auction. At most house auctions that I've monitored, the successful bid price is at least the price the bank would have sold the property at, anyway. Often, they sell for a higher price at auction!

If you're a first-time buyer, please think carefully about buying a foreclosure property. Let's say you're approved for $150,000 but you're monthly payment comfort level is really around an amount of $130,000. At 6.5% interest and a 30 year fixed mortgage, the difference between financing those two amounts is around $147/mo, or $821 vs. $948 on the mortgage payment.

That doesn't include property taxes, PMI, insurance, maintenance or any of the other stuff that goes along with owning a home. And often, property taxes on foreclosures have gone 'non-homestead', which adds another 19 mils to the property tax rate. Once a home is vacant, and often shortly after the Sheriff's Sale, the local assessor changes the status, so for at least part of the next year after pruchase, your property taxes will be higher.

It makes no sense for you to be looking at $160,000 or $180,000 houses thinking that you'll get a fantastic deal at your $130,000 comfort level, yet many consumers are doing this. It's a waste of time and makes the home buying process a lot more frustrating.

Get educated as to what kind of, or how much home you can buy for your price range. Look at houses, but also keep an eye on the ones that have sold. That's where the real value indication is seen. Honest, forthright discussions with a lender and a Realtor(R) that you can trust will help you get the most value in the home buying process, especially as a first-time home buyer.