Vance Shutes, your Saline, MI Real Estate Connection

In the Saline and Ann Arbor area, there are many different sizes and types of rental housing available to you. All you have to do is decide which kind you prefer. There are many positive and negative aspects associated with each and the type that is right for you depends on your preferences and desires. To make this process of figuring out what type of building you want to rent, here are some of the benefits and downsides associated with the various rental properties:

Single-Family Houses

Single-family houses are free-standing rental properties that are habited by one person, family, or group of renters. Single-family rental units are very much like owning your own house.

Positive Aspects:
As you do not share this rental space with any other tenants, single-family homes offer the most amount of privacy.
Negative Aspects:
Many of the amenities that you may expect from a larger rental unit are not available.

Duplex/Triplex/Quad

Positive Aspects:
You can expect similar conveniences as with a single-family home when renting a duplex, triplex, or quad unit. These rental units offer greater privacy and independence.
Negative Aspects:
However, like single-family homes, these rental properties may not offer as many amenities as larger rental buildings are able to provide. Furthermore, you must also consider that you do have neighbors that are closer to you than what would be in a single-family home.

Small Apartment Buildings

Positive Aspects:
Small apartment buildings offer more amenities (generally) than single family homes or townhouses, while simultaneously providing a living situation that you share with a small number of other tenants.
Negative Aspects:
You will have more neighbors in a closer proximity than you would if you were renting a single-family home or townhouse. Furthermore, you may not have access to as many amenities as you would have if you were to rent in a larger rental property.

Medium Apartment Complex

Positive Aspects: Medium apartment buildings will often provide many of the amenities expected from large apartment buildings, but shared with fewer people.
Negative Aspects:
You will have many neighbors that you must consider when living in a medium apartment building.

Large Apartment Complex

Large apartment buildings are comprised of numerous rental units and house the largest number of tenants under one roof.

Positive Aspects:
You can generally expect a greater amount of amenities and luxuries from a larger apartment building than you might from smaller rental properties. Many have on-site management and 24- hour emergency maintenance, in addition to other amenities like swimming pools, clubhouses, and fitness centers.
Negative Aspects:
You are surrounded by numerous other tenants and must co-exist with others peacefully. There will generally be more noise and activity in the building, which occurs naturally with the larger population of tenants.

In general, the smaller the rental unit with the smallest number of tenants the greater privacy and a more independent living situation. However, many of these smaller units are not able to offer the same variety of amenities provided by the bigger apartment complexes.

So, if you've decided to rent in the Saline or Ann Arbor area, you'll have a large number of options. If you have questions about any of the material covered in this post, please let me know. I'm always happy to answer your housing-related questions.

It's snowing again. And so continues our long winter of discontent here in Michigan.

So far this winter in Saline and Ann Arbor, we've had a lot of snow. But by the end of February, most of us are thinking about Spring. Our typical winter gives us about 42" of snow. Global warming, anyone?

While the snow is beautiful, it tends to make driving more difficult - especially when buyers want to get out to see homes. So what happens? We run low on salt available for our roads. Meanwhile, Detroit sits on top of huge salt mines. Go figure.

The largest city in Michigan has become a national joke due to a mayor with complete disregard for the station of his office. The will of the voters? The mayor claims to "be about the work of the people." Maybe the judiciary will have something to say about that. Still, the city serves as the butt of jokes on late-night talk show monologues, and Michigan suffers further in public image.

So what are we to do on snowy evenings? Order out for Pizza, and swizzle some adult beverages to forget the problems going on all about us in Michigan. But wait! Now we find that pizza prices will be rising substantially. What's the reason? Oh, wait! I know! We have such a demand for corn (for our E-85 vehicles) that the wheat crop is declining sharply. Man, those ethanol vehicles sure taste great!

Last Sunday, as many local Realtors® prepared for their open houses later in the day, we pick up the local newspaper to catch up on the news. There, above the fold on the front page, is an article about foreclosures remaining on a record pace in our County. Thanks, newspaper! That sure encouraged buyers to get out to visit open houses. Nice way to scratch the back of one of your largest advertising revenue sources. We'll think kindly of you as we wad up your publication to serve as kindling in our fireplaces while we dine on pricy pizza. Besides, the future of Real Estate advertising lies on the web. Goodbye, newspaper!

Meanwhile, the general populace cries out for some good news - in our long winter of discontent.

Don't Buy a Home.

What? Are you kidding?

As a Realtor®, my job is to help people to buy or sell their real estate. When someone wants to hire me to solve their real estate needs, I am very gratified.

But sometimes, it's better for my client to NOT buy (or sell) a home. How so?

You've probably heard all the perks about buying a house and how it's the centerpiece of the American Dream. But the American Dream is less about owning a house than the change it brings about in your lifestyle.

As a Realtor®, I want you to be ecstatic when buying a home. With an approach like that, it means that there are times when I recommend to clients that buying a house isn't the right way to go yet, particularly when the financial risk of keeping your home takes away from the enjoyment of it.

Here are five times when I counsel clients to wait on buying a house.

1. You're uncertain about your job.

Having a stable income is paramount in ensuring that your home doesn't turn into a financial burden, and almost everyone needs to work to bring in that money.

But if your company is considering layoffs, or moving their headquarters - or you're considering a career change - you may be forced into selling or renting out your home in short order. Doing so is time-consuming and costs money.

Generally, if you have to sell a home within five years of buying, you'll be lucky to get away at a break-even. I've had clients having to bring funds to the closing when they sell, rather than walking away with a check for their proceeds.

You may be mentally prepared to sell your house quickly, but the market may not be so kind, and you might have to take a large loss in order to do so.

2. You have bad credit right now.

When you take out a mortgage to buy a house, your lender charges you interest every month for the privilege, but when you have bad credit, your lender will charge you a lot more.

Why? Because people with bad credit cost lenders money by not paying promptly or not paying at all. And what they charge you may end up being several hundred dollars a month! Bad credit is any FICO score below the national average 720. But be of good cheer! With a few months of "good behavior" you can increase your FICO score and save yourself all that money.

3. You're already in a lot of debt.

I not only want you to be ecstatic after buying a home, I also want you to be able to keep it for as long as you want to. The total of a lot of student loans, credit cards, car payments, etc.: all of this not only hurts your ability to buy a house but also your ability to keep it.

The challenge is that if you take on more debt in the form of a mortgage, you may take away your ability to pay off other more expensive debt. At that point, you're basically paying a lot of money for money you no longer have - a lose-lose scenario.

For people in this situation, the rule of thumb is to pay off your debt with the highest interest rate first and be careful taking on new debt.

4. The only way you can afford the house is using a "creative" mortgage.

Can you imagine a world where everyone had to buy a house using only cash on hand? Very few people would own a home if the world were like that.

Lenders know this and have come up with a number of loan types (they call them products) that are designed to help people get into their dream houses. The most notorious of these loans is the option ARM, sometimes called a "pick a payment" mortgage. The possibility of negative amortization from this loan means you pay less monthly but end up owning less of your house every month too.

I would never do business with someone who recommended one of these loans to my clients, and I recommend you don't do business with anyone who tries to sell one to you.

5. You don't have (at least) some reserves after your downpayment and closing costs.

Buying your home is only the first step. The freedom that comes with home ownership also comes with additional costs like property taxes, special assessments, home maintenance and repair work, none of which were applicable when renting.

I'd argue that if you're stretched to the point where you have zero savings left over to take care of unforeseen expenses after purchasing your home, you risk a lot of unnecessary stress, losing your house or having it fall into disrepair.

The amount you have in reserve doesn't have to be huge, but a couple month's worth of your mortgage in a readily available form like a high-yield savings account, or even stocks, can ease your mind.

Purchasing a house is a major financial decision that stretches the finances of many families, but there's a difference between having to pack your lunch versus risking foreclosure because of a bad month.

There are a lot of folks who want to you stretch to buy a more expensive house than you need or one sooner than you might be comfortable with. My real estate advice is geared so that you're in a position to own and enjoy your home for a long time.

Back in November, a blog auther (Doug Quance) whom I follow posted a fascinating piece about a car wash. So how does this relate to selling a home in today's market? Read it here to find out:

There's a lesson in all this, I promise you

In a transitional part of Atlanta, there now stands a brand spankin' new car wash. It used to be a Burger King, but that closed years ago... and after demolition, this lot sat vacant for several years.

Fast forward a few years, and a sign went up announcing the construction of the car wash. That sign was up for at least a year in advance of the car wash actually being built... so on this busy street - there was NO question that EVERYONE in the area knew a car wash was coming.

So a few weeks ago, they opened for business - all bright and shiny - and offered a grand opening special of $5.99 to wash a car. They had a guy holding the sign out at the street to make sure everyone knew they were open and that a car wash was only $5.99.

Then, the following week, the sign guy was still out on the street - waving the public in - but this time, his sign stated "$4.99″ - instead of the previous week's "$5.99″. Hmm... maybe they're making it up on volume, who knows?

Another week goes by, and now the sign guy is holding a sign stating "$3.99″. Do you see a pattern here? Good. You're paying attention. Because there is one.

The car wash still does not really have any customers that I can see. And I'd be willing to guess that the owners are starting to panic. After all, they probably spent a million dollars building this place.

So here's my analysis and how it relates to real estate:

The car wash owners obviously realized that the market did not accept their initial price - no matter how much promotion they had done... and they responded with price adjustments.

Home sellers should take note of this market economics fundamental.

However, what the car wash owners have failed to realize is that two miles down the road is a well-established car wash that has been there for over ten years... and they have a $3.00 car wash. So - unless they add more value to their proposition - the public will continue to reject their offer.

And home sellers should not miss this message, either.

As long as your home does not compete in the marketplace, you will not get any takers. And why should you? There's a ton of competition out there.

So it will be interesting to see what the car wash owners are going to do next. I am sure that they feel like they "need" to get a certain price (just like some home sellers) but whether or not the market agrees with that price is another thing.

So maybe the guy down at the car wash gets it...

Or maybe not.

Folks, if you're looking to sell your home in this marketplace, realize from the outset that it will not be easy. Gone are the days when buyers will "at least take a look", and even further gone are the days when "they can at least make an offer". No, in today's market, if your home doesn't offer some incredibly compelling reason for a buyer to even take a look, you have no chance.

Listen to your Realtor. The car wash guy gets it!

True or False: The media decide whether you buy or sell a home.

That sounds ridiculous, even insulting. But there's no doubt that there is a psychological component to buying a house - and that a lot of negative publicity about the housing market can have an effect on whether you will buy, sell, or sit.

There has been some speculation that the media is usually responsible for the way the market goes. When people hear that the market is going to crash, they freak out and stop buying, which, in turn, causes the market to crash (imagine that!).

In my opinion, much of what happens in the national economy is shaped by the self-fulfilling prophecy of the national media headlines (USA Today, the New York Times, ABC, NBC, CBS, etc.) When you read, day after day, that we're headed toward a recession, isn't that what you'd do?

And yet, a review of history shows that the greatest fortunes are begun when "blood is running in the street". Isn't that what we have right now?

I've written previously about how our local market has fared these recent few years. Prices are down 15-25% from their peaks in 2003-2004. Has this ever happened before? Certainly not in our lifetimes - and, frankly, isn't that all the history that most of us ever bother to know?

In the world of the major stock markets, when prices decline over 20%, it is what is described as a bear market.

Well, the bear has certainly been growling in our local area! (Either that, or a few ferocious Wolverines - who, by the way, have been known to chase away bears in the wild).

Back to the stock market: When prices decline by 20%, wise investors know that it's time to take notice for buying opportunities. Wall Streeters use the term "contrarian investing".

When the stock market value of a company falls below the underlying value of the assets of a company, wise investors swoop in and buy up all the stock they can handle. At worst, they will own assets of a company, which they could later sell off to recover their investment. That's what's known as a sure thing.

If ever there was a sure thing in the local real estate market, IT IS NOW!

Oh, sure, you can call me wacky, or a Pollyanna, or worse.

And that's when I'll show you how the current prices of homes in our local market have declined below their underlying value.

How so?

Talk to a builder (if you can find one who is still in business - is blood running in their streets? Hmmm.....?). Ask them if they can even build a home right now for less than $125 per square foot. They'll say "No Way!" - not with the ever-increasing costs of concrete, lumber, copper wiring, drywall, asphalt shingles, and everything else that goes into a new home.

So, if a builder can't build a new home today for less than the prices of some newer (3-5 year old) homes on the market, haven't we hit our "underlying value"?

Contrarian investors are moving into our local markets in a big way. Shouldn't you get on board?

Back in 1980, a local newspaper included a headline "Will the last person leaving Michigan please turn out the lights?" Those were pretty bleak times in Michigan - I know, I was there. Doesn't it remind you of today?

The average price of a home in Ann Arbor in 1980 was in the $60,000s. Last year - 2007 - admittedly, a bleak year for our local real estate market - the average price of a home in Ann Arbor was in the $240,000s.

That's a pretty healthy increase, huh?

Trust me on this. Five years from now, a few wise people will be chuckling all the way to the bank when they sell off the investment properties they bought in 2008.

Will you be one of them?