Real Estate Talk and Views

Michigan has some world class freshwater fishing. In Michigan you could go fishing  365 days a year for something. 

On the west side of Michigan flowing into Lake Michigan are lots of rivers and streams. One of those great fishing rivers is the Muskegon River.  Literally thousands  of freshwater salmon and steelhead trout go there to spawn.  Getting to know the river is fun and challenging. A couple of weeks ago, on a very cold April day, son Tim and his fishing buddies Brian, sons Zack and Nick fished on this river and reported, yes it was cold but the fishing was pretty good. Here is some evidence of their day.

Picture 1 is Tim with his lunker, about 10 pounds of tasty steelhead.

Grandson  Zack with his catch of the day

Nick whose, fish got away,is really happy just to be out fishing and being able to tell his story about the “monster fish” that got away.

One can imagine the tremendous pressure on lenders and their teams to get shortsales processed and foreclosures handled.  What that means to the borrower that is heading for default and expects relief through a shortsale is that they need to decide very early when there is time.

Speaking as a Realtor in the field we are seeing periods of sometimes 4 to 5 months to get to the point where a workout negotiation really gets traction.  Until then it is a matter of making sure that everything is ready.  Here are a few anecdotal tips:

1. You probably have missed at least one payment and are late on the next one.

2. In order to have a short sale you have to have an offer with a qualified buyer in place so you need to have it ON THE MARKET.

3. You will need your income tax returns for the past 2 years.

4. You will need a hardship letter explaining what your situation is and why you can not afford to pay your mortgage and what has caused you to miss payments.

5. Bank statements, pay stubs are all necessary to have ready too.

6. The home needs to be actively marketed and the price reduced until a buyer steps in who will work with the process.  A buyer that is patient and will wait until the shortsale can be negotiated and closed.

If you are a consumer who knows that you are headed for a foreclosure at some point in the next few months, you should start now. For more information email billpark@parkplaces.com  , be sure to tell me where you live so if you are not in my area I can help you find someone who can help.

A call came in yesterday from a local attorney and good friend who had a client needing help. A quick synopsis led me first to think, “this person is screwed to the wall here” but I did agree to talk to the person and invited the attorney to have the person call me later as I had a busy day in front of me being  it was April Fool’s Day and I had to be on the look out for pranksters! Really, it was a busy Tuesday anyway with 5 deals in the pipeline and two listings to get posted plus all of the other activites going on.

Here is a brief version of this borrowers situation. Actual names and locations are not being used here but similar situatations are out there by the thousands.

After umpteen years of marriage, spouse moved on and took the income with, income that had supported part of the mortgage payment.  Spouse left behind could hardly make the payment on that nasty ARM, adjustable rate mortgage, which had just re-set(interest rate went up raising the payment to nose bleed heights).  Spouse, we will call the ”Remainder Spouse” reports being 90 days behind on the mortgage, the roof leaks and they have animals, horses on acreage that Remainder wants to keep and to keep the house too.  Does not want a foreclosure or bankruptcy either. What to do???

Since Remainder’s call came in late in the day I was on my hands free on the freeway driving home and  having this  conversation from the slow lane.   

Here is part of what I said to Remainder, “Okay, here is what I am hearing, “your spouse has gone, you are by yourself supporting the mortgage, your roof leaked into the master bed room, you have no funds to fix, you have it tarped, you are going to make your December payment this Friday, and you feel hopeless, do I have it right,” I asked. “Yup,” Remainder responded.

HERE IS HOW YOU HAVE TO START

Okay, first of all the Bank has enough foreclosures. They really don’t want to have your house back with the leaky roof, the mold that is forming as we speak but what they do want and do need to get is your mortgage payments because they need to pay their investors.  They get really testy when they don’t get their money.

So what you need to do is to go on a full scale frontal assult to tell your story  in a way that is compelling, respectful and most of all very well presented to the right people in the right way. 

• Have you filed your 2007 taxes, “no.” Okay get that done now.  You are going to need it for your case. 
•  Next, we need your financial picture, that will be a full budget of what you owe, what your real assets are, what your income is and information that will support why you will deserve a mortgage modification if they decide to give it to you. We will need two months of paystubs, two months of bank records on all accounts.
• Finally, a Cliff Notes version of a hardship letter that will also be your appeal of where you are and what this will do for you and how you will be able to make good on your very large high interest rate mortgage.  No more than a page and a half, type written, bullet points, so easy to read and understand it gets the point across to even the busiest of the busy overworked, we want your presentation to be a pleasure to read, to look at and we need to get it to the right people quickly.

Here is what I think your proposal should include:

1. Ask to have the late payments plus 3 more future payments put on the end of the current mortgage.  (You need money to fix the roof)
2. Ask to convert to a fixed rate so that you can stop worrying about another interest increase that will put you back in this situation.

I also recommended that Remainder invest $25.00 to run a credit check with a credit simulator to find what Remainder  needs to do to raise that credit score from the miserable place it is now to some where in the mid 600’s so that in the future Remainder does not have to contend with the bruised credit issues. And besides, Remainder probably will not want to be Remainder Alone forever and who knows the addition of a significant person would be nice and a great credit score makes life so much better too.

Well, I am home, gotta go now, call me tomorrow so we can talk about your plan to get going on this. You do the work, I’ll be your coach.  Remainder said, “this is the first time in 6 or 7 months that anybody has even tried to help me, I feel better already.”  I said, “you are welcome, I know if I can help enough people get what they want, eventually I will get what I want, a great trust relationship that is more than willing  to refer people to me to sell or buy a house.”

Have a good day.

Okay, so you want to buy a home and you are finding that even with a market flooded with good homes at affordable prices you are still on the fence. Or, maybe your move is a short term one and you are concerned about what to do, buy or rent?

First of all Hire A Great Realtor. Realtors do a lot more than find homes for people. A great Realtor can help that Buyer get into really nice homes and help them with the right strategy to make it work for the Buyer.

Available in my Livingston County Michigan Market are two items that make it easier for buyers like maybe you are to get into a home.

Negotiating for help with your closing or mortgage costs!

How about an interest rate buy down? My friend at The Premiere Mortgage Corporation gave me an article the other day about buying down the interest rate. Now this is not like the adjustable rate mortgage that can go crazy with payment hikes. In simple terms it is a predictable rate adjustment spread over 3 years and then it is fixed. Why would a buyer want to do that? It is a way to ease the transition of say going from a rental to a house payment. The additional taxes and insurance that may elevate the cost of a monthly payment as you start a new job, make a move, get a promotion , start a new marriage, what ever the situation it can give you a cushion while you are getting started or re-started.

The way it can work. Again, in very simple terms, the buy down can be done so that it is part of the purchase offer. Asking the seller to pay “points” on the mortgage to “prepay” some of the interest expense that you as the buyer will be paying on the mortgage over the next 3 years. You should always get in writing what this means and seek to understand how it works. If you would like to ask more questions about this please email me and we can  talk about your specifics. 810 534 2005

It is no secret that there are plenty of good deals.  If you “want to sell” and are not really motivated to aggressively price and do the necessary staging and repairs to compete, you may be well advised to “stay home partner.” At least for the foreseeable future.

On the other hand, if you have to sell and there is no question that you have to move because you just can’t stay, then there is good news.

Depending on just where your home is, and the market influencing your home’s selling ability, will determine what kind of strategy you should use.

#1. If you have lots of equity, determine the probablE selling price of homes like yours. And price below this price enough to stand out from the crowd. Usually 2 or 3% will make a statement.  Your Realtor can help you  do this. Get a local one that knows the market very well. It has been my experience the on-line evaluation services are not really in touch with what is going on in your neighborhood. Your local agent can come and see what is going on.  Better yet, have your Realtor take you to some “comps” that are for sale. It helps to know what the competition is doing anyway. Your equity is precious, I know, but it is also the leverage to allow you to move on by giving some of it up if necessary.

2.  The second strategy is if you have used all of your equity or don’t have any but you have some cash aside or can get some.

What this may do is to allow you to accept an offer that does not pay the bill and you have to bring some money to closing. The seller  has to do a cash infusion because there is no equity.  It allows you to sell in an oversupply market at less than what you would in a balanced market where supply is a little less than what the demand is. 

On of the economic principles of equity that may have been violated is that stripping  out the equity to the max has created a lot of the problems in today’s real estate market.  The “frugel” cardinal rule is that equity is not for borrowing if you have less than 20%. Keeping 20% equity will let you sell in nearly any market without damaging your credit among other things. It may be too late to be frugel on this  house, but just remember, keep the mitts off the equity, let it build so there is a cushion.  It is not an ATM. Sorry, I am ranting but it is so true and sometimes we get upset with the truth don’t we.

3.  Desperation.  Impending events that are life changing, there is no equity, your credit is in good standing but you are out of cash and have to move.  No question.  Again, you will need an experienced hands on coach here that you will tell all to.  Realtors are getting pretty good at handing short sales, helping people keep their dignity and getting them out of their home.  The process is called a short sale because the bank agrees to take less than what is owed and allow the expenses of the sale to be taken out also.  You as the seller will get a ding in the credit but will recover much more quickly than if you let it go to foreclosure.  Also, check into recent passage of a bill that would waive the “shadow” income that previously got a w-1099 and charge to you the seller as taxable income.

Consult your CPA on that one, they will have the latest.

If you have questions please feel free to contact me. 

Mortgage Loan Modification Workshop Press Release

Escalating foreclosure numbers are perhaps needless.  Fear and and denial can rob normal and responsible people of their peace of mind and stall them into in-action when they should be proactive and in real action!

On March 6th at my office I will be leading this workshop to encourage friends, clients and others who need help, to get started now.  Waiting and delaying are costly.  Taking action may be as simple as calling your lender and asking for help.  What we will do at the workshop is to give the encouragement and support necessary to take action on March 6th, 7 PM at the Keller Williams Realty Office, 1005 E. Grand River In Brighton, Mi. Reservations are appreciated. A follow up session is planned for March 13 for those that would like to come back, share their experience and also for more help if needed. For more information or help, call Bill Park 810 534 2005

First some basics: Economies are always based on supply and demand.  When the supply side is more than the demand, prices get lowered to move unwanted inventory.  Sellers who ignore this fact of life and maintain an above market price will not be getting any offers on their home in the near future.

In a high housing  supply market, like we see in our local economy in Livingston County Michigan, homes that are priced to sell will sell.  That means that they are priced well below where they were being priced even a few months ago and certainly last year.

But the big questions on seller’s minds these days is “how do I get my house looked at?” No amount of advertising will sell an overpriced home.

Here are 7 tips on attracting buyers to come look at your home.

1.  Improve the condition.  Clean, paint and replace items that have been deferred. Spring is coming soon so first chance get out and get the curb appeal up to the plus pluse level.
2. Offer Buyer Incentives.  Your buyer will need a mortgage so offer to help.  Your agent can help you figure out what you can offer.  Discounts and allowances sometimes work but helping that buyer get fiananced into your house may be a more valuable incentive. 
3. Offer Above Average Selling Commission.

Agents usually have to pick out which homes they are going to show, and there are literally dozens to pick from in any price range. So think about it, which one, if you were a commissioned sales person, would you pick to show today? One that offers a discounted commission or one that offers a percentage point or two above what other sellers like you may be offering?

4. Be willing to look at selling short if your situation demands you get out quickly.  There are basically two kinds of “short sale.”  By the way short sale means that you are selling for less than what is owed and there will be a shortage of funds at close.  One kind of short sale is where you, the seller, bring money to the closing, your mortgage gets paid off, your credit is unblemished and life goes on. The second kind is  when you don’t have any money you can bring to closing and the bank needs to agree to take “less than what is owed on the balance of the mortgage.”  While this solution will affect your credit somewhat, it is far better than having a foreclosure and/or bankruptcy to follow your credit for a long time.

5.Have Your Home Pre Inspected.

Invest the money to have a pre-listing professional “Home Inspection” done. Carefully, with the Inspector, go through the house top to bottom.  Then, fix the easy fixes. Major defects will need to be attended to (fixed) or disclosed.  Better to fix them because  a fussy buyer will not consider your home unless you give them a huge discount.

6.Have your home professionally staged.

 A  staging specialist will tell you if the paint colors need to be updated, what wall paper will or won’t work, placement of furniture to really show off spaces and don’t forget the garage, basement and even stairs and porches.

7. Finally, pictures, pictures, pictures.  Email your agent pictures of your home in different seasons if you have them. Agents with websites can show them off to the buyer on online. Visual and virtual tours are expected by buyers.  They will look on line before they ever set foot in many homes.  So make sure there is an abundant supply of photos either taken or made available for showing.

For more information about selling and offering incentives to get buyers and agents to come to see your home, email your questions to info@parkplaces.com .

Dale Caregie, in his book “How To Stop Worrying and Start Living” gives some great advice. He tells readers “to imagine the worst possible outcome . . . and then to work to make the best outcome possible happen.”

In a soft real estate market it is easy to find plenty of dark thinking. But let’s look at what is possible.

•      2007 Homes Sales were still among the best in history.
• Interest rates are still at all time lows.
• FHA loans, once on the very back shelf of lenders, are coming out in full force-offering new buyers and “recovering credit” buyers a great opportunity to get into a home.
• Short Sale Opportunities can help buyers get a great home at a great price AND help the seller unload their debt obligations and help to preserve their credit.
• Mortgage loan modifications are taking place for borrowers to stay in their home. Note, if you are a borrower in trouble, talking to your lender is critical. Waiting will cost dearly.
• Seller Concessions are helping buyers get into a home with mortgage “buy downs” and covering prepaid items like taxes, closing costs and insurance.

A word to Buyers and Investors sitting on the sidelines waiting for the market “to get even better” should consider these factors:

• Interest rates could raise to levels substantially higher than they are now and possibly knocking you out as a buyer.
• Your credit rating could drop and lender credit requirements could raise, again leaving you out of the game.
• Down payment requirements may go up and you find you don’t have enough cash to make it work.
• The house you had your eye on, gets snapped up by a buyer who knows a good deal when they see it and decided  take action before you could.

So there is a good market out there, but it won’t last forever so you better get moving.

One can imagine the tremendous pressure on lenders and their teams to get shortsales processed and foreclosures handled.  What that means to the borrower that is heading for default and expects relief through a short sale  is that they need to decide very early when there is time.

Speaking as a Realtor in the Field we are seeing periods of 4 to 5 months to get to the point where a workout negotiation really gets traction.  Until then it is a matter of making sure that everything is ready.  Here are a few anecdotal tips:

 1. In order to have a short sale you have to have an offer with a qualified buyer in place.

2. You will need your income tax returns for the past 2 years.

3. You will need a hardship letter explaining what your situation is and why you can not afford to pay your mortgage.

4. Bank statements, pay stubs are all necessary to have ready too.

5. The home needs to be actively marketed and the price reduced until a buyer steps in who will work with the process.  A buyer that is patient and will wait until the shortsale can be negotiated and closed.

If you are a consumer who knows that you are headed for a foreclosure at some point in the next 9 months, you should start now. In our next post we want to encourage you to be talking to your lender.  Inside sources tell us that only 1 in 2 contact their lender at all before going into foreclosure. They want you to call.  Workouts are happening and people are finding ways to work it out. You may be able to also.

For more information email billpark@parkplaces.com   

It seems like we all talk a lot about the “market.” Every Seller worries about the market and will they get enough from their home so they can buy another home.  Every Buyer is dreaming of the good deal they are going to get on their dream house. Every Realtor hears it, “hey how’s the market doing, anything selling?” From their friends and people who want to make conversation, and that is great.  Personally I don’t mind the question at all.  Usually I answer with a robust, “it is incredible!” and it is.  Have you ever seen so much attention being paid to real estate and home ownership? 

Homes Are Selling!

And, really, there are houses selling, people are getting mortgages and not everyone is depressed about the economy. Investors are looking and getting great buys.  In 5 years we will all look back at this period and have lots of stories of the “Memorable Real Estate Market of ‘07.  It will also be remembered as the time when we  had to step up to the plate and make things happen in ways that we never anticipated.

So What Can Be Done By the Real Estate Community? Help Someone Save Their Home.

Besides helping buyers buy and sellers sell, try helping somebody keep their home. How do you do that?  you ask.

Tell People About Asking For A Mortgage Modification Agreement

The new word on the street is coming across as “loan modification” or “mortgage modification.”

For Realtors and Mortgage brokers who make their living on “new business” this doesn’t look like a win.  That is unless one is approaching their business from a “servant” attitude. Helping people has great dividends in the long run.

The Boomerang Effect

While you are busy helping that past client, friend or other person save their home, before you know it you are working with a new referred buyer or seller from someone who just can’t stop talking about what a great job you did, “he/she helped find a way to save our home, I want to tell everyone about MY REALTOR OR MY MORTGAGE BROKER ….”

 The Mortgage Modification (A very short version)

A modification to a mortgage could possibly allow someone to keep their home.  It could allow them to get a lower interest rate on their mortgage, a lower payment and some relief. These are not cookie cutter modifications, they are negotiated agreements between the lender(s) and the borrower. They take a lot of work with lots of detail and preparation. 

 Yes, There Is Hope, There Can Be Progress

The good part for the real estate community is that it will stop the bleeding and slow down the rate of foreclosures and short sales flooding the market in some areas. And for lenders, it saves huge amounts of money.  Not everyone will qualify, but for those who do, it is a Godsend.

The short sale is another solution.  Any Realtor doing much business these days is very aware of these.  Lots of work and for the homeowner they offer a better option than foreclosure or even bankruptcy.  With a short sale and some speedy work on getting the credit report cleaned up and getting the bill payment record on track, another house may well be in the near future.  And at these prices, they might just end up with something better.

There are, of course, other avenues to solving some of these situations but, the main message here is that there are options.  If enough Realtors and Mortgages Officers will become proactive and help enough people, the market will stabilize and reach a better balance quicker. And if enough buyers and investors absorb the excess inventory, again in some parts of the country, The Memorable Market of ‘07 can be just that, a memory. 

Bill Park is an associate real estate broker in the State of Michigan. Your comments and thoughts are welcome.