Robert Smith

Here’s a list of the sales in Genoa Township for the first week of March 2012 (March 1-March8).

$485,000 – 5861 Hartford Way, Pine Creek Ridge

This was a new build that sold quickly. It’s listed as 1 day on the market and was listed at $399,900. My guess it went under contract earlier in the construction process and the buyers wanted some upgrades that increased its value. It’s great to see more new construction popping up in the area again. Brighton schools.

$236,000 – 5440 Sharp, East Crooked Lakefront

This was my listing and it sold in 15 days for $16,000 OVER list price. Pretty deplorable condition and it took a lot of groveling to get the bank to list it in ‘as in’ condition, but it received multiple offers because there’s just not any Crooked Lakefront property out there. Both were cash, as-is offers. It got 18 showings in the first 10 days! Normally, I’m pleased to have banks do rehab work on foreclosures to make them more marketable, but they would have lost money on this one and it was very likely a new owner would do massive remodeling anyway. It really needed an owner that would be able to see beyond its current condition to see its potential. Howell schools.

$146,000 – 6369 Sundance Trail, Prairie View Hills

This was another foreclosure, first listed at $166,900. Owned by Fannie Mae (FNMA), it sold in 48 days, but at a $20,000+ discount from list price. Its last sale showing in the MLS was in 2004 for $278,900. That’s quite a discount, even for a 1974-built home. Brighton schools.

If you want to buy a Genoa Township home, give me a call. I’d love to help you.

There seems to be a lot of activity in the housing market right now. As well it should. We are seeing ridiculously low mortgage interest rates (floating just over and under 4% for 30 yr loans), housing prices are (finally) starting to creep upwards after years of decline, and the buyers that are ready to move out of rentals recognize this is a great time to purchase.

We are seeing low inventory levels, lower than what I consider 'desirable', which makes buyers do a lot of shopping. And a lot of the inventory is in a condition that doesn't suit itself to quick decisions on writing a purchase agreement. But buyers that miss a few opportunities figure out the winning game plan.

1. Get new listings reviewed quickly, first on screen, then as a drive-by.

2. Get into the ones you want to see as fast as possible.

3. Write a fair offer.

The last one is very subjective, but understanding that any home priced at 'market' value and in decent or good condition will receive multiple offers is important, too. In most cases, you will get a chance to come back with your 'highest and best' offer. Highest, as in price, and best, as in terms.

If you're mainly looking at short sales, you need patience as a Number 4 on the above list. Foreclosure homes sell quicker as a rule, but you may need to consider a rehab loan or doing a lot of work before moving in to the house, so it's not for everyone.

If you're thinking about buying a house in Brighton or selling a house in Howell, call me. I also work other areas, and I can always refer you to a good agent in other markets if necessary

Strategic default is defined as walking away from a mortgage that you have the ability to pay. Why do homeowners do this? Or not do this? It can be pretty much broken into two schools of thought.

First, the ethical argument. You agreed to buy your house at a then fair market price with a mortgage at the then market rate. You signed a contract obligating you to keep making payments even if similar houses are now selling for half the value of what you paid. Even if a new mortgage can be obtained at a lower interest rate by another buyer. Even if you can’t refinance.

The other argument is that this is a business deal, plain and simple. If I don’t make the payments, you take the house. I’m not going to make the payments, so feel free to take the house.

The report examines the use of social media and social influence on our decision making. If enough people that you know (or are connected to) are saying its fine to strategically default, you begin to get more receptive to the idea. After all, it worked out great for them, why not me? (A lot like the continual anecdotes I hear about the ‘buddy’ that picked up a $600,000 house for $100,000 as a foreclosure - I can do it, too.)

An industry source, CoreLogic, says that 11 million homes (22 percent of the housing market) are underwater and that another 2.4 million have less than 5% equity, so there’s a lot of potential for more strategic defaults out there.

Banks are also part of the problem. People looking for refinance options often get the runaround or can’t qualify with the current stringent requirements. I know mortgage reps that can’t refi their own homes, what chance does a regular consumer have? It may be easier for some people to opt into strategic default as a result of feeling helpless, or because they think the big corporations don’t care about them.

A single strategic default (which ends up as a foreclosure home) won’t kill the value in a neighborhood. But think about the areas where there are a lot of strategic defaults in addition to the short sales and foreclosures due to hardship – loss of a spouse, losing a job, illness. Distressed sales do, in fact, bring down property values and are not good for neighborhoods. Strategic default is only a part of the overall problem.

A report in DS News quotes a study that claims 38% of all homes bought in 2011 were financed by cash, not mortgages. Tight lending criteria is likely one of the causes, but investors are also looking for ways to make their money yield better returns, too. This trend is expected to continue for the near future.

My own experience is that there are a lot of cash buyers who want to be owner-occupants. It’s not unusual for me to see cash offers on homes up to the $140,000 price point, so there’s a lot of competition for homes in ‘move-in’ condition.

A recently released Realtor Confidence Index for November 2011 also indicated that 28% of home purchases were cash financed. This report was based upon results obtained from just over 3,000 Realtors nationwide and is conducted monthly by the National Association of Realtors Research Division.

Please remember one very important thing. A cash offer does not guarantee that you will be the successful bidder in multiple offer situations. While it takes some uncertainty out of the equation for the seller, many sellers are still looking at the bottom line. Depending on the margin between a cash and financed offer, they may take a ‘cleaner’ and lower priced cash offer or they may take the higher priced mortgage offer knowing that it will take up to 45 days to close.

Everybody wants a deal but if you’re seriously underbidding on homes that have been on the market less than a month, you’re not going to be in the game.

My main market area (Livingston County Michigan) is one of the ‘lucky’ areas that’s experiencing nominal value increases over all. Of course, some individual homes, neighborhoods, and market areas are still seeing decreases in both the average and median prices. Market stats can be a funny thing. Remember what Mark Twain said about statistics, “There are lies, damn lies and statistics.”

So what’s a buyer to do? Here’s a couple of thoughts for you.

My first recommendation is to talk to your Realtor® about the value of a house that has your interest. The inventory is down (no subjectivity here, it’s a fact!) and the ones that you like are probably going to appeal to other buyers. I am amazed at the number of multiple offers I’m getting as a listing agent this year – and every one of them sold for more than list price. And they’re appraising, too!

Your agent can tell you if a home has a chance at appraising higher than list price. If you’re looking at a bank-owned that has been renovated and is truly in ‘move in’ condition, it’s not unusual for a term to be added to the inevitable multiple offer situations. That is that YOU are responsible for any shortfall between the accepted offer price and the appraised value. So if you tried bidding $160,000 on a house listed at $130,000 and it appraised at $150,000, guess what? You have to dig for the extra $10,000 ($160K accepted offer price - $150K appraised value = $10K shortfall). If you can’t cover it, you forfeit your EMD.

That’s just so nobody overbids on purpose with the hope of locking in the offer to later whittle down the purchase price. Yes, there’s isn’t much that the banks haven’t seen in the last few years.

My second recommendation is to see a lot of houses. At least a dozen. Of what you really want. If you looked at a few foreclosures and said, “ugh! Too much work”, or “not for me”, then you need to concentrate on the move-in condition homes. It won’t take long for you to instinctively know when a property is priced right and when it is overpriced. If you’re not familiar with the area, really grill the agent on your concerns and what is important to you. I’ve always felt that an educated buyer is the best buyer and I welcome those kinds of questions.

Last, don’t wait. Be ready to pull the trigger. Some banks are building in a waiting period for offers on foreclosures. It can range from a week to longer. They want to make sure the property gets some market visibility before taking an offer. The days of a low ball offer first day on the market are pretty much gone.

Make your offer reasonable in price and be prepared for what you will do in the case of multiple offers. Have an inspector selected so you can schedule that event quickly. It’s taking 30-45 days to close so do everything that you can to keep the process rolling along.

Take media reports with a grain of salt. All of the "home prices still dumping" reports do not apply to every state, city or neighborhood. Value is an ever changing thing and you have to be able to recognize those changes. Working with a market-savvy Realtor® and trusting your instincts will give you the edge.