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Homeownership and your retirement

Friday, January 6th, 2012

By Donna Levos Coldwell Banker Weir Manuel

Recently our CEO Kelly Sweeney shared a quote in his sales meeting address about renting vs. buying:   
 
“If you buy a home, you get to make mortgage payments for 30 years and then you get your money back through the asset you own. If you pay rent for thirty years you get to keep paying rent for the rest of your life!”

 

Have your clients considered homeownership as part of their retirement strategies?

Regardless of age, our clients should be thinking about retirement. Do they want to able to retire when and how they want? If so, they should consider the following factors:

Homeowners dodge rent inflation

Let’s talk about inflation. If rents increase annually at the typical 3.2%, a $1,500 rent payment will cost a renter $900,000 over 30 years. A homeowner paying that same amount in a fixed-rate mortgage payment would pay $540,000 and would be finite with the final mortgage payment.

Homeowners build equity over time

A renter will build no equity by writing that rent check for years. In contrast, a $300,000 home appreciating at a conservative 1% growth rate over 30 years will gain a $100,000 nest egg for the homeowner.

Homeowners get tax help

Consider the tax benefits involved in homeownership. By writing off your mortgage interest and property tax deductions, you are taking advantage of additional opportunities to save money.

Homeownership as a legacy

Finally, there are some things you can’t put a price tag on. For some people, the satisfaction of leaving their home to their loved ones is priceless. Additionally, unlike their renting counterparts, homeowners are able to customize, decorate and make improvements to their homes.

Just remember: long–term home ownership can provide retirement security through the growth of equity.

Posted in Coldwell Banker Weir Manuel, Investing in real estate, Michigan Real Estate Market, buy a home, coldwell banker, commercial real estate, real estate, real estate market, retirement strategy, sell a home | Comments Off

Multiple Offers: Multiple Points of View

Friday, January 6th, 2012

Our local market has a low supply of move-in ready homes, and many serious buyers with pent-up desire to purchase. These conditions are the perfect storm for a seller to receive multiple bids. How well you weather that storm as a buyer’s or seller’s agent depends on how well you communicate and set your clients’ expectations.

Let’s take a look at multiple bids from both the buyer’s and seller’s points of view:

The Seller’s Agent:

Your seller is excited that there are multiple offers on his home. You offer suggestions such as negotiating with the other agents to make the weaker offers stronger, or asking all of the buyers to bring back their ‘highest and best’ offers. But in the end, your role is to communicate the potential risks and rewards involved in accepting any of the offers, and leave the decision to your seller. You may also want to caution the seller that while he sits in the driver’s seat, dragging out the process may alienate his buyers.

The Buyer’s Agent:

This is probably the more emotional end of the deal. Your buyer has fallen in love with a house and has written an offer, only to find that the seller is entertaining multiple bids. Your buyer needs to be patient, have a thick skin and set limits about how high he is prepared to bid based on his budget. Good communication and a solid strategy can help alleviate emotions and keep everyone focused on the goal: getting the house.

Cash Is King:

Buyers that can bring cash into a multiple bidding situation have a serious leg up on the competition. In December, a CBWM agent showed a $445,000 house to his clients on a Saturday, knowing that all offers had to be in by the following Monday. His clients immediately wrote an offer for $458,000 with 40% down. They were dismayed when another buyer won the house by offering less, but paying with cash. A cash offer is often more attractive to the seller because it poses the least amount of risk.

Some strategies to help your buyer make a competitive offer:

 

  • Present your client’s pre-approval letter and make sure it includes a verification of income, credit and assets
  • Encourage flexibility about occupancy (many buyers are offering 30 days occupancy)
  • Suggest that your buyer put down an earnest money deposit (at least 3%)
  • As a last resort, a buyer can appeal to a seller by writing a letter explaining how interested he is in the home.

 

Time is of the essence:

While time is always of the essence in real estate, it is especially true in today’s market. As real estate professionals, we would be remised if we did not instill the proper sense of urgency in our clients. This sense of urgency is important whether your client is the one making or accepting an offer.

Consider this quote when advising your clients: “The house you saw today that you want to think about tonight and make an offer on tomorrow, was seen by someone yesterday who is writing an offer on it today.”

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Posted in Coldwell Banker Weir Manuel, Michigan Real Estate Market, Multiple Bids, Multiple Offers, buy a home, coldwell banker, homes for sale, housing, real estate, real estate market, sell a home | Comments Off

Home sales in region continue decline in November but still better than a year ago!

Thursday, December 15th, 2011

By Daniel Duggan

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The slide in residential home sales that started in August continued into November, according to data released today.

Although the number of sales increased year over year, the numbers have slipped each month since August, according to data from Farmington Hills-based Realcomp II Ltd. for Livingston, Macomb, Oakland and Wayne counties.

The median sale price in November was flat compared with October and up 4.5 percent over 2010.

It’s typical to have sales slow in the fall, then spike in the spring, said Kelly Sweeney, CEO of Birmingham-based Coldwell Banker Weir Manuel Realtors.

On the whole, he said, this year should be about the same as last year — which is an improvement, because many of the 2010 deals were driven by government incentives.

In preparing a budget for next year, Sweeney said, his firm anticipates residential growth of 2 percent to 3 percent with an aggressive estimate of 4 percent to 5 percent.

“When we did our budget three, four years ago, we were looking at how much of a decrease it was going to be, how many people we needed to let go and how many offices needed to close,” he said. “It’s a return to a much more manageable situation. Things are going in the right direction now.”

In November, there were 4,094 residential sales, down from 4,176 in October and up from 3,876 in November 2010, according to Realcomp.

The median sale price was $70,000 in November, identical to October. The median sale price in November 2010 was $67,000.

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Posted in Coldwell Banker Weir Manuel, Michigan Real Estate Market, buy a home, coldwell banker, homes for sale, housing, real estate, real estate market, sell a home | Comments Off

Paving the Way for Michigan’s Comeback

Tuesday, December 6th, 2011

As we look toward a real estate recovery in Michigan, we know that communities must find ways to create jobs and support local businesses. Grand Rapids has been at the forefront of Michigan’s comeback for several years now. The latest bright spot on its resume is the purchase of a foreclosed property that has been turned into what some are calling a “small-business incubator.”

This past summer, the LINC Development Center opened its doors in the Madison Square neighborhood.  LINC is a community development program whose services include helping local entrepreneurs launch their small businesses by providing space to rent at a discounted rate, as well as other wrap-around services such as legal advice and accounting. LINC also offers assistance with foreclosure prevention, housing counseling, and rental property management.

Daryl Ross, LINC’s co-executive director, in a recent interview for The Grand Rapids Press said: “Micro-business on a neighborhood level is definitely going to be the way that Michigan comes back.”

The LINC building itself is a comeback story in terms of real estate. The space was the former library at the corner of Madison and Hall. The empty building (which was foreclosed upon four times) was an eye sore for eight years. Now, after a $1.7 million renovation, the building has opened once again with renewed purpose.

In addition to growing new businesses, Grand Rapids also plans to continue it rich agricultural heritage by nurturing plans to open an urban farmers market. Six vacant buildings will soon fall to the wrecking ball, to make room for a new 130,000-square-foot indoor/outdoor marketplace. It will sit on approximately 3.5 acres, and will include an outdoor seasonal farmers’ market, a rooftop greenhouse, a pint-sized children’s kitchen, year-round space for vendors, and restaurants. The city projects that the market will create up to 270 full-time jobs and possibly open by spring of 2013.

These are examples of just a few of the many property renewal success stories out of Grand Rapids. Hopefully, other Michigan cities will look to them for inspiration. Creating jobs, nurturing local businesses and increasing consumer traffic can only mean good things for both residential and commercial real estate in our communities.

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Posted in Coldwell Banker Weir Manuel, GRAND RAPIDS, Michigan Real Estate Market, Uncategorized, Urban Renewal, buy a home, coldwell banker, housing, real estate | Comments Off

New Construction: Activity Brings Opportunities

Tuesday, December 6th, 2011

There is pent-up demand out there for buyers to own a newly-constructed home. The same factors that have helped Michigan home sales overall (such as low interest rates, and lack of inventory) are propelling many buyers toward new construction.

With new construction being more affordable than ever, buyers are lining up as they did recently at a national sales event for Toll Brothers in Novi to put a deposit down on a new home.

Pulte is also experiencing brisk sales. The company recently reported a 371% increase in dollar volume sales in the past year.

Another silver lining in the current housing market is that land costs and labor costs have come down, allowing more builders to break ground on new projects.

Toll Brothers and Pulte for instance, are said to be hunting for major land acquisition sites in several of our markets.

So with all this building activity and opportunity, how can we as Realtors add value to the buyer’s experience?

Here are a few ideas:

Know the Latest on Lending
Know what new lending products exist and help your buyer make a wise choice.  As the demand for new construction rises, many lenders are recognizing that they need to provide updated lending products to buyers.

Read the fine print. Too many buyers don’t carefully read (or sometimes don’t fully understand) their building contract. As a Realtor you are in a position to catch things they may have missed. Sometimes builders expect the buyer to pick up the bill for transfer taxes and title, which is fine as long as the buyer is aware of this expectation.

Incentives: Make buyers aware of builder incentives offered as part of the negotiating process. For example, Pulte and Toll Brothers currently offer a $78,000 allowance toward upgrades, lot choice or other improvements. Some buyers will tend toward unnecessary upgrades. Help them make smart choices about what type of upgrades really add value to their new home.

Set their expectations: Finally, one of the most frustrating things for a buyer building a new home is miscommunications about expectations during the building process. Taking our clients through the new build process step-by-step to set realistic expectations will improve their experience.

Over half of all new construction buyers will hire a Realtor to aid them in their purchase. We are in a unique position to offer support and experience working with builders to create a positive outcome in what can often be a stressful process.

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Posted in Builders, Coldwell Banker Weir Manuel, Construction, Michigan Real Estate Market, New Construction, buy a home, coldwell banker, homes for sale, housing, real estate, real estate market, sell a home | Comments Off

Short Sales: Communication is Key

Tuesday, December 6th, 2011

It has been estimated that 40% of all current real estate sold nationwide is distressed (REO or Short Sale).  Given that there are so many of these properties in our own markets, it is important that we stay informed, specifically on the ever-changing short sale process.

Working as a team

The good news about having dealt with so many short sales in the past few years is that Realtors, title companies, and lenders are working better together as a team to expedite the process.

The process has improved slightly, but has not gotten a whole lot quicker.  As lenders continuously put new procedures in place and the volume of these sales continues to increase, short sales are still running on average 3 to 6 months.

It is important to consider the advantages of working with a title company when negotiating a short sale. By utilizing the resources that our title company partners provide, you can recover some of your own time and reduce the liability risks for both yourself and your clients. Remember that you do not have to stand alone in this process.

Protecting everyone’s interests

Short sales can be a great opportunity for your client, if they are handled carefully. Here are some reminders and a recent change in the process:

Deed restrictions Agents need to communicate to their buyers that if there are deed restrictions on the property being purchased in a short sale, that many lenders are now requiring a 30 to 90 waiting period to re-sell the property. Freddie Mac specifically requires a 120 day waiting period.

Arms-length transactions Realtors need to require their sellers to be up front about selling their distressed property to relatives, friends or anyone they have known prior to the sale. The Realtor also has to disclose any relationship he may have to the buyer or seller. Failure to fully disclose these relationships can result in a fraudulent transaction. A short sale amongst parties that know each other can be approved in some cases, with full disclosure.

Short sale affidavit changes:

Finally, in response to requests form NAR and the American Land Title Association, Freddie Mac recently revised its mandatory short sale affidavit policy on November 18th, 2011. These changes were made in response to concerns over vague language in the previous affidavits which possibly put those signing at risk for liability.

(From the NAR website):  “The purpose of the affidavit is to prevent fraud by requiring the buyer, the seller, the real estate brokers, the escrow/closing agent, and any transaction facilitator to make various certifications (including that the short sale is an arm’s length transaction and the buyer will not resell within 120 days unless there are substantial improvements). Servicers are required to implement the changes by Jan. 1, 2012, but are encouraged to do so immediately. Each servicer covered by the policy must update its forms to comply with the revised policy.”

To view more information on the changes, go to: Realtor.org.

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Posted in Coldwell Banker Weir Manuel, Michigan Real Estate Market, Short Sales and Foreclosures, buy a home, coldwell banker, homes for sale, housing, real estate, real estate market, sell a home | Comments Off

Vacant Home Ordinances Complicate Transactions

Monday, March 22nd, 2010

We are currently witnessing a rash of new municipal ordinances dealing with vacant homes. Some municipalities believe that by regulating vacant homes, their potential negative impact on property values may be avoided.

These ordinances typically feature a registration process, registration fees and inspection fees. In some cases, municipalities are even going so far as to require buyers to acquire certificates of occupancy in order to move into a home which has been vacant for a specified period of time.
The public purpose behind most of these initiatives is to ensure that vacant homes do not become a negative influence to surrounding properties and neighbors. While this is a legitimate goal, it also appears that a few municipalities have chosen to use these ordinances as revenue generators and/or a method by which code inspector salaries can be supported.

Because the requirements under these ordinances vary greatly from town to town, there is no way to summarize the details of each here. It is important, however, for home sellers, home buyers and their real estate agents to be aware of them. The terms and conditions of a purchase agreement may be affected by these ordinance provisions in some cases.

The real estate transaction continues to get more complicated every day. It is our goal at Coldwell Banker Weir Manuel to continue to stay abreast of every new development that affects the sale or purchase of real property and advise our clients accordingly.

Posted in buy a home, sell a home | 2 Comments »

Is Homeownership Still Part of the American Dream?

Monday, March 15th, 2010

For some two hundred years, homeownership in this country was a desire of almost every American family. Due to the excesses of the past decade, some are now suggesting that the concept of homeownership should no longer be pursued.

We must be careful as a society that short term economic turmoil does not reset valued long-term thinking. The majority of Americans still hold homeownership sacred. Trulia just did a survey showing seventy seven percent of those questioned still believe that owning a home is a part of the American dream.

Some are questioning the American dream given that housing is in the midst of one of its worst markets ever. But the facts show that the last ten years have not treated the homeowner that badly. Obviously, people who purchased a home during the middle of the last decade have seen their value depreciate over the last several years. But, real estate was never seen as a good short-term investment.

If we look at housing values over the last 10 years, we find that even through these tough times real estate has averaged over fifty percent return as an investment.

The chart below compares real estate to other investments over those ten years.

Then why this challenge today? Well, at the turn of the century, when prices were appreciating in some areas by as much as 20% annually, many got caught up in the belief that housing values should double every few years for the rest of time. That belief created all sorts of reckless behavior.

Many purchased homes well beyond their financial means. Others decided that they would gamble on future values and interest rates by taking exotic mortgages, thus treating their homes as speculative investments. And others used their homes as ATM machines, continually withdrawing their equity in the form of home equity loans.

For too many, cast aside was the traditional viewpoint that a house was a home first and then a pretty good long-term investment. Traditionally, homeowners may have borrowed against the house to put a child through college, finance a wedding, or pay for medical bills. In recent years spending discipline for some has become more relaxed and home equity savings were spent on things that could only be characterized as frivolous.

While homeownership should certainly be viewed as a long term investment, a home primarily is a place to create a personal lifestyle. When structured properly based on solid advice from a trusted professional, homeownership offers the benefits of security, stability, control over one’s environment, equity buildup and income tax advantages.

For 200-plus years, Americans were eager to purchase property because they knew that on a long-term basis it would create wealth. That concept is alive and well in this country even today.

Posted in Michigan Real Estate Market, Uncategorized, buy a home, real estate, sell a home | 1 Comment »

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